• 


Operative  Ownership 


A    SYSTEM    OP    INDUSTRIAL    PRODUCTION 
BASED  UPON  SOCIAL  JUSTICE  AND  THE 
RIGHTS  OP  PRIVATE   PROPERTY. 


DESIGNED  TO  ENFORCE  A  JUST  DIVISION  BETWEEN 
CAPITAL    AND    LABOR    OF    THE    WEALTH    WHICH 
THEY    JOINTLY     PRODUCE,     ENABLING    INDUS- 
TRIAL TOOL-USERS  TO  BECOME,  IN  WHOLE  OR 
IN  PART,  TOOL-OWNERS,   THEREBY  EFFECT- 
ING   A    MORE     GENERAL     DIFFUSION    OF 
WEALTH   AMONG    THE    PEOPLE,    INSPIR- 
ING  A   MORE    GENERAL    REGARD    FOR 
THE  RIGHTS  OF  PRIVATE  PROPERTY, 
AND,  BY  A  REAL  UNION  OF  CAPITAL 
AND  LABOR,  PROVIDING  A  SAFE- 
GUARD TO   PRIVATE  INDUSTRY 
AGAINST  EXCESSIVE  GOVERN- 
MENTAL REGULATION, 


BY 

JAMES  J.  FINN 


CHICAGO 

LANGDON  AND  COMPANY, 

PUBLISHERS 


f5 


"The  form  of  association  which,  if  mankind 
continues  to  improve,  must  be  expected  in  the 
end  to  predominate,  is  not  that  which  can  exist 
between  a  capitalist  as  chief  and  work  people 
without  a  voice  in  the  management,  but  the  as- 
sociation of  laborers  themselves,  on  terms  of 
equality,  collectively  owning  the  capital  with 
which  they  carry  on  their  operations,  and  work- 
ing under  managers  elected  and  removable  by 
themselves.'9 

JOHN  STUART  MILL. 

"Ultimately  we  desire  to  use  the  government 
to  aid  as  far  as  can  safely  be  done,  the  indus- 
trial tool  users  to  become,  in  part,  tool  own- 
ers." 

THEODORE  ROOSEVELT. 


COPYRIGHT    1916,    BY 
LANGDON   AND  COMPANY. 


PREFACE. 

In  the  following  chapters  I  have  attempt- 
ed to  show  the  need  of  some  system  of  in- 
dustrial production  whereby  the  strife  and 
unrest  which  characterize  industrial  rela- 
tions today  may  be  avoided,  the  industrial 
freedom  of  the  laboring  classes  achieved, 
and  the  rights  of  property  restored  and  se- 
cured, which  of  late  years,  have  been  grow- 
ing progressively  insecure  as  the  result  of 
the  increasing  hostility  of  the  numerically 
predominant  propertyless  element  of  the  la- 
boring classes,  also  to  outline  and,  in  a  ten- 
tative way,  to  work  out,  such  a  system,  as 
well  as  to  suggest  a  plan  whereby  the  gen- 
eral adoption  of  the  system  may  be  brought 
about. 

The  system  proposed  is  to  be  achieved 
through  three  successive  stages  of  develop- 
ment, as  follows:  first,  joint  operation  of 
industrial  establishments,  with  joint  par- 


PREFACE. 

ticipation  in  profits,  by  capitalists  and  op- 
eratives; second,  joint  ownership  gradually 
superadded  to  joint  operation;  and,  final- 
ly, complete  ownership  by  the  opera- 
tives collectively,  in  each  establishment,  of 
the  capital,  in  the  forms  of  machinery,  ma- 
terials, etc.,  with  which  they  carry  on  their 
operations. 

I  make  no  pretense  to  the  discovery  of 
any  new  principle  of  the  science  of  econom- 
ics. The  system  which  I  have  advocated, 
as  well  as  the  plan  suggested  for  bringing 
it  about,  involves  merely  the  application  of 
old  principles  to  new  conditions.  The  prin- 
ciple of  the  ownership  of  the  tools  of  indus- 
try by  the  individual  tool-user  is  older  than 
civilization;  and  the  system  of  collective 
ownership  advocated  in  this  book  is  merely 
an  adaptation  of  that  principle  to  modern 
industrial  conditions.  A  system  of  indus- 
trial production  embodying  the  principle 
of  collective  ownership  by  the  workers  was 
predicted  by  John  Stuart  Mill  sixty  years 
ago,  as  the  form  of  industrial  association 
which  must  ultimately  predominate.  That 
principle  has  been  advocated  by  many  lead- 
ing economists  and  publicists  of  the  pres- 
ent day,  and  is  in  practical  operation  today 
in  numerous  establishments  in  Europe  and 
America. 


PREFACE. 

So  it  is  also  in  regard  to  the  plan  pro- 
posed for  the  general  introduction  of  the 
system  of  collective  operative  ownership. 
Its  leading  features — eminent  domain,  the 
use  of  government  credit,  joint  operation, 
and  joint  ownership  of  industry  by  capital- 
ists and  operatives — have  been  applied  be- 
fore in  a  variety  of  ways.  What  I  have 
done  in  the  following  chapters  is  merely  to 
assemble  ideas  and  principles  evolved  in 
the  course  of  the  social  and  industrial  de- 
velopment of  society,  and  to  arrange  them 
in  harmonious  relation,  in  the  plan  above 
mentioned. 

Arrangements  between  capital  and  labor, 
for  participation  in  profits  and  for  joint 
ownership,  have  heretofore  been  made  only 
as  acts  of  grace  by  benevolently  disposed 
capitalists,  and  in  exceptional  cases;  and  it 
is  the  purpose  of  the  scheme  proposed  in 
this  book  to  provide  a  way  by  which  the 
like  benefits  may  hereafter  be  secured  to 
operatives  of  industrial  establishments  gen- 
erally, as  matters  of  social  justice  and  le- 
gal right,  but  without  violating  in  the 
slightest  degree  the  personal  or  property 
rights  of  the  capitalist. 

While  the  question  of  the  rights  of  pri- 
vate property  and  private  industry  enter 
into  the  discussion  of  the  subject  of  Oper- 


PREFACE. 

ative  Ownership  as  incidental  to  the  main 
purpose  of  the  book  as  above  outlined,  they 
are  nevertheless  scarcely  less  important,  re- 
gard being  had  to  the  interests  of  society 
at  large,  than  are  the  rights  of  labor.  In- 
deed the  rights  of  labor,  in  the  sense  con- 
tended for  in  this  book,  would  be  of  compar- 
atively little  value  if  the  industries  in  which 
labor  applies  itself  to  the  production  of 
wealth  were  to  be  continually  subjected  to 
the  nagging  and  annoying  interference  of 
governmental  regulative  agencies  or  com- 
missions at  every  turn;  or  if  the  wealth 
which  labor  produced,  into  whosesoever 
hands  it  might  lawfully  pass,  were  liable 
to  be  taken,  or  its  value  impaired  or  de- 
stroyed, by  the  arbitrary  and  unreasonable 
exercise  of  the  taxing  or  the  police  power 
of  the  State. 

The  system  described  in  the  following 
pages  is  the  more  beneficial,  therefore,  be- 
cause not  only  does  it  secure  to  the  laborer, 
even  in  its  earliest  stage,  a  just  share  of  the 
wealth  which  he  produces,  but  by  the  direct 
and  substantial  interest  which  it  will  give 
him  in  the  use  of  the  capital  invested,  and, 
in  the  later  stages  of  the  system,  by  the 
ownership,  in  whole  or  in  part,  of  that  cap- 
ital, it  will  make  it  to  the  interest  of  the 
laboring  class  to  so  exert  its  influence 


PREFACE. 

through  the  ballot  as  to  protect  the  rights 
of  private  property  and  private  industry 
against  encroachments  upon  those  rights 
by  the  government,  by  which  means  they 
now  are  often  seriously  impaired,  while 
other  and  more  serious  encroachments  are 
threatened. 

I  am  profoundly  conscious  that  the  pres- 
ent volume,  in  its  treatment  of  the  subjects 
with  which  it  deals,  is  full  of  imperfections; 
and  many  relevant  questions  in  relation  to 
the  scheme  proposed  will  occur  to  the  read- 
er to  which  no  answer  will  be  found  in  this 
book.  In  extenuation  of  its  short-comings 
in  this  regard,  it  must  be  borne  in  mind 
that  the  book  is  not  submitted  as  a  complete 
elaboration  of  a  fully  developed  system,  but 
rather  as  presenting  in  a  tentative  way  a 
system  which  in  many  important  features 
must  be  developed,  not  by  a  single  mind, 
but  by  many,  through  the  free  expression 
and  interchange  of  ideas,  and  in  some  re- 
spects also  by  experience.  Intending  to  take 
part  in  the  further  development  of  the  sys- 
tem, I  shall  welcome  an  interchange  of 
views  in  regard  to  it  with  any  person  who 
may  be  interested  in  the  subject  and  quali- 
fied by  education  or  experience  to  partici- 
pate in  such  development 

September,  1916. 


CONTENTS 

CHAPTEB  I 

THE  CLASS  STRUGGLE 

Page 

The  Social  Unrest 7 

Wage-Capitalism 11 

The  Rise  of  Wage-Capitalism  in  England 13 

Wage-Capitalism  in  America 17 

Scantiness  of  Wages 20 

A  Decent  Living  Wage 22 

Elements  of  a  Living  Wage 25 

False  Philanthropy. .; 28 

Extreme  Poverty  of  the  Working  Classes 30 

Appalling  Infant  Mortality ,.. .  33 

Uncertainty  of  Employment . . . . .  34 

The  Workers  Organize 36 

Strikes  and  their  Cost 39 

Exorbitant  Toll  of  Capitalism 42 

A  Remedy  or  Socialism 44 

CHAPTER  II 

PROPOSED  REMEDIES  FOR  INDUSTRIAL  ILLS 

Page 

Socialism — Co-operation — Trade   Unionism 46 

Socialism 47 

Socialism  and  Individualism 49 

Present  Aim  of  Socialism 52 

Trend  Towards  Socialism i 54 

The  Government  in  Business 57 

Is  Socialism  Declining? 62 

Socialism  a  Real  Menace 64 

Co-operation  , 66 

Profit  Sharing  and  Labor  Co-partnership 68 

The  Maison  Leclaire 70 

The  Familistere  Society  of  Guise 73 

Slow  Progress  of  Co-operation 77 

What  Co-operation  Lacks. 78 

Trade  Unionism 80 

Trade  Agreements 82 

The  True  Goal  of  Trade  Unionism 85 


CONTENTS 

CHAPTER  III 

OPERATIVE  OWNERSHIP 

Page 

The  Term  Defined 91 

Fundamental  Error  of  the  Capitalist  Theory 94 

Mutual  Needs  of  Capital  and  Labor 97 

Strife  Between  Capital  and  Labor 99 

How  Class  Warfare  May  Be  Ended 101 

Pre-Capitalist  Industries    104 

Adaptation  of  the  Principle  of  Workers'  Ownership  of 

Tools  to  Modern  Conditions 107 

Distinguished  Advocates  of  the  Principle 109 

Obstacles  to  its  Adoption 110 

Government  Aid 114 

Manner  of  Its  Use 115 

Transition  from  Capitalism  to  Operative  Ownership..  118 
Joint  Ownership  Distinguished  from  Profit-sharing...  123 


CHAPTER  IV 

WAYS  AND  MEANS 

Page 

Rights  of  Property  Sacred 129 

Views  of  Society  Changing 131 

Obstacles  to  Operative  Ownership 132 

Example  of  Benevolent   Capitalists 133 

Eminent  Domain   137 

Eminent  Domain  an  Option  of  Purchase 139 

Eminent  Domain  and  Government  Credit 141 

Examples  of  Government  Aid 146 

Ireland  Before  the  Land  Purchase  Acts  and  After ....  148 

Land  Capitalism  and  Industrial  Capitalism 150 

Government  Aid  in  the  United  States 151 

Example  of  Indemnity  to  Government  in  Guaranty  of 

Bank  Deposits 155 

Safety  Through  Indemnity  Fund 157 

Little  Risk  and  Great  Benefits 160 

Consider  the  Workingman 161 

Government  Credit  to  be  Seldom  Used 164 

An  Equitable  Basis  of  Division 167 

Introducing  the   System 175 

Conserving  the  Public  Interests 177 

A  Joint  Operative  Board 179 

Operatives  as  Joint  Owners 181 

Operatives  as  Sole  Owners 182 

Legislation  not  Indispensable 183 


CONTENTS 

CHAPTER  V. 

BENEFITS  OF  OPERATIVE  OWNERSHIP 

Page 

All  Classes  of  Society  Benefited lg"6 

Benefits  to  the  Employer 187 

A  Safeguard  Against  Governmental  Interference 189 

Benefits  to  Operatives 194 

Great  Increase  of  Labor  Efficiency 195 

Increased  Efficiency  Under  Profit-Sharing 198 

Fallacious  Notions  About  Increase  of  Output 200 

Most  for  Least  and  Least  for  Most 201 

Scientific  Management 202 

Cheapening  of  Products 205 

Unemployment  Problem  Solved 208 

Benefits  to  the  State 210 

Benefits  to  Society ,,.,.,. 213 

CHAPTER  VI 

DISAPPEARING  RIGHTS  OF  PROPERTY 

Page 
Conservative  Tendency  of  Operative  Ownership 218 

The  Rights  of  Private  Property 220 

1  Governmental  Greed  of  Power 222 

Forms  of  Governmental  Encroachment  on  Rights  of 

Private  Property  225 

Taxation  / 226 

Income  Taxes 230 

Inheritance  Taxes 232 

Progressive  Taxation 234 

Government  Regulation  of  Industry 238 

Federal  Regulation i 239 

Enlargement  of  Governmental  Powers  by  Judicial 

Construction  241 

The  Sherman  Anti-Trust  Act 242 

Venerable  Traditions  Violated 245 

Regulation  Running  Riot , 246 

CHAPTER  VII 

DISAPPEARING  RIGHTS  OF  PROPERTY— (Continued) 

Page 

The  Police  Power 248 

Menace  of  the  Police  Power 249 


CONTENTS 

Page 

A  Creature  of  the  Courts 250 

Police  Power  versus  Constitutional  Guaranties 251 

Conflicting  Decisions 254 

Charges  of  Judicial  Bias 256 

No  Bias  Against  Progressive  Legislation 257 

Courts  Influenced  by  Public  Opinion 258 

How  the  Police  Power  Operates 261 

The   Grange  Movement . 263 

A  Momentous  Decision 2£6 

Ruinous   Railway   Regulation 268 

True  Basis  of  Governmental  Right  of  Regulation 269 

Retrospective  273 

The  Cause  of,  and  the  Remedy  for,  Existing  Condi- 
tions , , , 276 


CHAPTER  VIII 

CONCLUSION 

Page 

Advantages  Summarized 279 

Paternalism  Carried  to  Excess 282 

Propertyless  Class  Beneficiaries  of  Public  Extravagance  285 

The  Wealthy  Class  the  Prey  of  Demagogues 286 

Undue  Interference  Impossible  Under  Operative  Owner- 
ship   289 

Lack  of  Voting  Power  the  Real  Crime  of  Big  Business  290 

Equality  of  Rights  Contingent  upon  Voting  Power 291 

Wealth  Secure  Under  Operative  Ownership 292 

Conclusion  ,  v , , ,,,.,,, ,,,,,,,,.,,,,,,,,,  293 


CHAPTER  I. 

WAGE-CAPITALISM  AND  THE  CLASS 
STRUGGLE. 

THE  SOCIAL  UNREST. 

We  live  in  a  time  of  unprecedented  social 
unrest,  the  outcome  of  which  no  man  can 
foresee,  nor  can  any  man  predict  with  con- 
fidence. Many  attempt  such  prediction,  but 
in  most  cases  they  but  reflect  their  own 
convictions  as  to  what  ought  to  be.  Mani- 
festations of  this  condition  of  unrest  are 
everywhere  in  evidence.  In  the  daily  press, 
in  the  current  magazines,  in  the  recent  book 
literature  of  economics  and  related  sub- 
jects, we  constantly  see  references  to  the 
prevailing  social  unrest.  The  Congress  of 
the  United  States  has  taken  official  notice 
of  the  existence  of  this  condition,  and  cre- 
ated a  Commission  on  Industrial  Relations 
for  the  purpose  of  investigating  the  cause 
and  suggesting  a  remedy. 

Social  disturbances,  sometimes  of  a  more 
violent  character  than  have,  as  yet,  devel- 
oped in  the  present  situation,  and  often 
partaking  of  a  political  nature,  have  oc- 

7 


8          OPERATIVE  OWNERSHIP 

curred  in  the  past,  now  in  one  country  and 
now  in  another;  but  never  before  has  so- 
ciety been  agitated,  at  once  so  profoundly 
and  so  universally,  by  a  spirit  of  unrest, 
purely  economic  in  its  nature  and  origin, 
as  at  present.  Everywhere  students  of 
sociology,  men  learned  in  the  science  and 
the  history  of  social  development,  and  fa- 
miliar with  the  conditions  which  in  the  past 
have  preceded  great  and  violent  changes 
in  the  social  order,  realize,  and  many  have 
given  utterance  to  the  conviction,  that 
events  fraught  with  momentous  conse- 
quences are  impending,  and  that,  if  the  ex- 
isting social  order  is  to  be  perpetuated,  the 
conditions  of  wealth  production  must  be  so 
modified  as  to  produce  a  greater  measure 
of  justice  in  the  apportionment  of  the 
product,  as  between  capital  and  labor,  than 
obtains  at  the  present  time. 

Inquiry  as  to  the  cause  of  the  present 
condition  of  social  affairs  elicits  a  number 
of  answers  as  variant  as  the  classes  rep- 
resented by  the  persons  to  whom  the  in- 
quiry is  addressed.  Thus  the  capitalist  will 
give  one  reason,  the  representative  of  labor 
another,  the  socialist  a  third,  the  legislator 
a  fourth,  and  so  on;  each  reflecting  the 
views  more  or  less  prevalent  among  the 
class  which  he  represents,  and  affected,  in 


THE  CLASS  STRUGGLE  9 

greater  or  lesser  measure,  by  the  interests 
or  the  environment  of  that  class. 

However  widely  variant  the  answers 
may  be  in  other  respects,  it  will  be  observed 
that  they  all  possess  one  feature  in  com- 
mon, namely:  that  they  refer  the  trouble 
proximately  or  remotely,  to  the  institution 
of  capitalism.  Thus  one  will  ascribe  as 
the  cause  the  selfishness  and  greed  of  the 
employer  of  labor,  as  manifested  in  his  re- 
lations with  his  employees.  Another  will 
give  as  the  cause  the  improvidence  and  un- 
thriftiness  of  the  laboring  classes,  which 
prevent  them  from  living  upon,  and  being 
content  with,  the  ample  wages,  as  such  per- 
sons contend,  which  the  laborer  receives 
from  his  capitalist  employer.  A  third  will 
place  the  blame  upon  both  the  employer 
and  employee  for  their  lack  of  mutual  co- 
operation for  the  promotion  of  their  com- 
mon interests,  and  their  efforts  to  over- 
reach one  another,  one  by  exacting  the 
greatest  possible  amount  of  work  for  the 
least  money,  and  the  other  by  giving  the 
least  work  for  the  most  money.  And  a 
fourth  will,  perhaps,  find  the  cause  in  the 
too  rapid  development,  or  the  too  general 
use,  of  machinery  by  which  the  capitalist 
seeks  to  multiply  the  productive  power  of 
labor,  thereby  throwing  some  of  those  em- 


10        OPERATIVE  OWNERSHIP 

ployed  out  of  work.  But  at  the  core  of 
every  answer  will  be  found  some  feature 
or  some  idea  which  associate^  the  trouble 
unerringly  with  the  institution  of  capital- 
ism. 

The 'careful  observer  of,  or  the  serious 
inquirer  into,  the  prevailing  industrial  con- 
ditions, whatever  his  interest  or  his  envir- 
onment may  be,  cannot  fail  to  perceive  a 
causative  relation  between  capitalism  and 
the  various  social  phenomena  the  sum  of 
which  is  expressed  in  the  term  "social  un- 
rest." To  such  persons  the  conclusion  will 
be  irresistible  that  if  the  prevailing  con- 
dition of  social  unrest  is  to  be  remedied; 
if  the  social  and  political  catastrophe  which 
very  many  well  informed,  thoughtful  and 
conservative  persons  can  discern  as  the  ev- 
ident climax  of  this  unrest,  is  to  be  averted, 
it  must  be  done  by  either  a  radical  refor- 
mation, or  the  total  abolition,  of  capitalism 
in  at  least  one  of  its  most  familiar  phases. 

In  order  to  arrive  at  a  proper  under- 
standing of  the  conditions  before  men- 
tioned, of  the  imperative  need  of  a  remedy 
for  those  conditions,  and  of  the  merits  of 
the  remedy,  which  it  is  my  intention  to 
suggest,  and  to  some  extent,  elaborate,  in 
this  volume,  a  brief  survey  of  that  phase 
of  capitalism  which  has  to  do  with  the 


THE  CLASS  STRUGGLE          11 

employment  of  labor  for  wages,  of  its  rise 
and  development,  of  its  effects  upon  society 
in  general,  and  upon  the  laboring  classes 
in  particular,  would  seem  to  be  indispens- 
able. 

WAGE-CAPITALISM. 

In  the  broadest  and  most  widely  recog- 
nized sense  of  the  term,  capitalism  stands 
for  all  the  activities,  social  and  political, 
of  capitalists,  whereby  accumulated  or  con- 
centrated wealth  is  employed  for  the  pro- 
duction of  new;  wealth,  or  by  which  the 
productiveness  of  capital  is  increased.  In 
a  narrower  sense,  and  that  in  which  the 
term  is  very  generally  used  by  advocates 
of  the  cause  of  labor  in  what  is  often  called 
"the  class  struggle,"  it  means  the  economic 
system  whereby  capital,  in  the  form  of 
land,  machinery,  raw  materials  or  money, 
is  owned,  but  not  used,  by  one  class  of  per- 
sons called  capitalists,  and  used,  but  not 
owned,  by  another  class,  called  workers, 
operatives,  or  some  other  name  of  like  im- 
port, who  use  it  in  the  production  of  new 
wealth;  receiving  for  their  labor  a  fixed 
or  ascertainable  wage,  without  any  voice 
in  the  management  of  the  establishment 
in  which  they  are  employed,  nor  any  share 
in  the  wealth  which  they  produce,  beyond 


12        OPERATIVE  OWNERSHIP 

the  agreed  remuneration,  which  remunera- 
tion is  fixed  without  any  definite  relation  to 
the  value  of  the  product  of  such  labor,  and 
which  product  becomes  the  sole  property 
of  the  capitalist. 

It  is  with  capitalism  in  this  latter  sense, 
which  in  reality  is  but  one  phase  of  that 
institution,  that  we  shall  be  chiefly,  though 
not  exclusively,  concerned  in  the  following 
chapters;  and  to  distinguish  this  sense  of 
the  term,  the  leading  characteristic  of 
which  is  the  labor-wage  feature,  from  the 
broader  sense  of  the  term  as  above  defined, 
as  well  as  from  the  wage  system  in  gen- 
eral (of  which  system  also  the  relations 
between  capital  and  labor  above  mentioned 
present  but  a  single  phase),  I  shall  here- 
after refer  to  capitalism  in  the  narrower 
sense  above  mentioned  as  Wage-Capitalism. 

The  quintessence  of  wage-capitalism  is 
the  relation  of  master  and  servant,  a  re- 
lation which  involves  power  and  dominion 
on  the  one  side,  and  dependence  and  ser- 
vility on  the  other.  It  is  this  which  enables 
the  capitalist  to  appropriate  the  whole 
product  of  the  laborers'  toil,  over  and  above 
the  meager  subsistence  which  the  laborer 
must  receive  if  he  is  to  live  and  reproduce 
his  kind,  so  that  the  supply  of  labor  at  the 
service  of  the  capitalist  may  be  constant 


THE  CLASS  STRUGGLE          13 

It  is  this,  and  the  very  meagerness  of  his 
wage,  which  holds  the  laborer  in  a  condi- 
tion which  in  a  certain  sense  may  be  con- 
sidered one  of  bondage  to  the  capitalist. 
For  though  the  laborer  may  sometimes  ex- 
ercise a  certain  liberty  of  choice  as  to 
where,  or  at  what  occupation,  he  will  work, 
it  is  such  a  form  of  liberty  as  the  illustrious 
philosopher  and  sociologist,  Herbert  Spen- 
cer, had  in  mind  when  he  wrote:  "This 
liberty  amounts  in  practice  to  little  more 
than  the  ability  to  exchange  one  slavery  for 
another,  since,  fit  only  for  his  particular 
occupation,  he  has  rarely  an  opportunity 
of  doing  anything  more  than  decide  in 
what  mill  he  will  pass  the  greater  part  of 
his  dreary  days."* 

THE  RISE  OF  WAGE-CAPITALISM  IN  ENGLAND. 

Wage-capitalism  came  into  existence  in 
England  during  the  last  half  of  the 
eighteenth  century  as  the  result  of  condi- 
tions having  their  origin  in  the  invention 
of  the  steam  engine,  the  spinning  jenny, 
the  power  loom,  and  such  like  labor-saving 
inventions  of  that  period.  Where  formerly 
the  industrial  products  required  to  supply 
the  wants  of  society  were  supplied  by  ar- 

*Principles  of  Sociology,  by  Herbert  Spencer,  Sec.  820. 


14        OPERATIVE  OWNERSHIP 

tisans  working  with  simple  tools,  in  house- 
hold shops,  the  new  machinery,  multiplying 
the  productive  power  of  each  worker  many 
times,  was  grouped  together  in  spacious 
shops  or  factories,  and  operated  by  the 
power  of  a  single  steam  engine,  making 
competition  by  hand  workers  impractica- 
ble, so  that  the  latter  were  gradually  forced 
to  abandon  their  domestic  industries  and 
seek  employment  in  the  factories. 

The  high  cost  of  the  new  machines, 
grouped  as  the  purposes  of  economy  re- 
quired them  to  be,  made  it  impossible  for 
the  workers,  even  collectively,  to  procure 
the  required  capital  to  own  them;  and  so  it 
was  supplied,  for  the  most  part,  by  a  class 
of  persons  who  had  previously  amassed 
moderate  fortunes  by  trading  in  the  prod- 
ucts of  the  domestic  industries  which  the 
new  factory  system  was  superseding. 

The  greatly  increased  productive  power 
of  the  new  system  was  such  that,  even  with 
the  reduced  prices  obtained  for  the  manu- 
factured products,  the  supply  was  always 
greater  than  the  demand.  Also  the  reduced 
number  of  operatives  required  to  supply 
the  demand  by  means  of  the  new  processes, 
left  many  persons  unemployed.  More- 
over, many  of  the  new  machines  were 
operated  by  women  and  children  which 


THE  CLASS  STRUGGLE  15 

lessened  still  further  the  number  of 
former  tradesmen  of  the  domestic  indus- 
tries for  whom  there  was  employment 
in  the  factories.  The  glut  of  the  labor 
market  thus  produced  was  something  un- 
heard of,  and  factory  owners  did  not 
scruple  to  take  advantage  of  it  to  impose 
upon  their  unfortunate  employees  the  most 
severe  conditions  that  could  be  endured, 
while  paying  the  lowest  wages  at  which 
subsistence,  with  little  regard  to  decency, 
could  be  maintained.  The  hours  of  labor 
were  usually  fourteen,  and  in  many  cases 
sixteen,  per  day,  and  children  from  six  years 
of  age  up,  as  well  as  women,  without  regard 
to  age  or  condition,  were  required  to  work 
in  this  way.  The  conditions  of  contact  be- 
tween the  sexes  in  the  factories  were  such 
as  to  promote  licentiousness  within  and 
without  the  factory.  Drunkenness  and  im- 
morality in  both  sexes  were  of  common  oc- 
currence. The  domestic  ties  and  the  duties 
arising  therefrom  between  husband  and 
wife  and  between  parent  and  child,  were 
lightly  regarded.  Even  human  slavery, 
disguised  as  apprenticeship,  was  practiced. 
It  took  the  form  of  "binding  out"  by  poor- 
law  guardians  to  factory  owners,  of  chil- 
dren from  the  poor  houses,  ostensibly  as 
apprentices.  These  were  herded  together 


16       OPERATIVE  OWNERSHIP 

f 

when  not  at  work,  in  crowded  and  unwhole- 
some sleeping  rooms,  without  regard  to 
sex,  insufficiently  fed,  poorly  clad,  and,  if 
disobedient  or  refractory,  were  cruelly 
beaten,  so  that  many  died  from  ill  treat- 
ment. 

A  parlimentary  report  for  the  year  1833 
contains  the  following:  "We  hear  of  chil- 
dren and  young  people  in  the  factories 
overworked  and  beaten  as  if  they  were 
slaves;  of  diseases  and  distortions  only 
found  in  the  manufacturing  districts;  of 
filthy,  wretched  homes  where  people  huddle 
together  like  beasts;  we  hear  of  women 
and  girls  working  underground  in  the  dark 
recesses  of  the  coal  mines,  dragging  loads 
of  coal  in  places  where  horses  could  not 
go,  and  harnessed  and  crawling  along  the 
subterranean  pathways  like  beasts  of  bur- 
den. Everywhere  we  find  cruelty  and  op- 
pression, and  in  many  cases  the  workmen 
were  but  slaves,  bound  to  fulfill  their  mas- 
ters' commands  under  fear  of  dismissal  and 
starvation."* 

Such,  in  part,  is  the  story  of  wage-cap- 
italism as  exemplified  in  the  English  fac- 
tory system  and  in  the  mining  industry 
during  the  first  third  of  the  last  century. 

*Quoted  by  Charles  Beard  in  The  Industrial  Revolution, 
London,  1901. 


THE  CLASS  STRUGGLE          17 

It  seems  incredible  that  such  conditions 
could  exist  in  a  civilized  and  a  Christian 
land;  but  the  brief  description  here  given 
falls  far  short  of  the  horrible  reality  as 
related  by  the  writers  of  that  period.  Any- 
one who  wishes  to  learn  more  of  the  hor- 
rors of  factory  labor  of  which  but  a  faint 
idea  can  be  formed  from  what  has  been 
said  in  the  foregoing  pages,  is  referred  to 
the  work  of  P.  Gaskell  entitled  "The  Manu- 
facturing Population  of  England,  its  moral, 
social  and  physical  condition,  and  the  changes 
which  have  arisen  from  the  use  of  steam  ma- 
chinery" (London,  1833).  Any  one  who 
reads  Mr.  GaskelPs  work  will  realize 
that,  without  exaggeration,  it  may  be 
said  that  the  condition  of  the  English  fac- 
tory operative  in  the  early  days  of  wage- 
capitalism  was  vastly  worse,  in  regard  to 
food,  clothing,  housing  and  morals,  than 
that  of  the  serfs  of  the  middle  ages,  or  of 
the  negro  slaves  of  the  Southern  United 
States  before  the  war  of  the  rebellion. 

WAGE-CAPITALISM  IN  AMERICA. 

In  America  wage-capitalism  did  not  so 
early  find  a  foot-hold,  nor  have  the  condi- 
tions which  existed  in  the  factory  districts 
of  England  ever  found  a  parallel  in  this 
country.  The  conditions  of  the  working 


18        OPERATIVE  OWNERSHIP 

class  in  the  early  days  of  wage-capitalism 
in  this  country  were  bad  enough,  however, 
and,  as  to  hours  and  general  conditions  of 
labor,  differed  only  in  degree  from  the  con- 
ditions which  existed  in  England,  and  not 
so  greatly  in  that  regard  as  one  might  ex- 
pect in  a  newly  settled  country.  "In  both 
countries  the  cradle  and  the  home  were 
robbed  to  secure  victims  for  the  natal  sac- 
rifice of  new-born  capitalism."*  About  the 
year  1816  there  was  estimated  to  have  been 
100,000  persons  employed  in  the  manufac- 
ture of  cloth  in  the  United  States,  of  whom 
about  10  per  cent,  were  men,  66  per  cent, 
women  and  female  children,  and  23  per 
cent.  boys.  The  hours  of  work  were  twelve 
to  fourteen  per  day,  and  the  wages  ranged 
from  $11.50  per  week  for  a  comparatively 
small  number  to  an  average  of  $1.50  per 
week  or  less,  for  female  children.  The  tex- 
tile mills  in  New  England  generally  ran 
thirteen  hours  a  day  the  year  round,  and 
one  in  Connecticut  ran  over  fifteen  hours. 
Professor  Ely,  the  learned  American 
writer  on  economics,  declares  that  women 
and  children  had  to  be  at  work  at  half  past 

*Social  Forces  in  American  History,  page  172,  by  A.  M. 
Simons. 


THE  CLASS  STRUGGLE          19 

four  in  the  morning,  and  sometimes  were 
urged  on  by  the  use  of  the  cowhide.* 

The  rapid  development  of  railway  con- 
struction, which  began  about  the  year  1830, 
following  the  invention  of  the  locomotive, 
the  invention  of  the  hot  blast  process  in  the 
iron  industry,  the  use  of  anthracite  coal  in 
the  smelting  of  iron,  and  the  general  use 
of  coal  for  steam  purposes,  which  resulted 
from  the  rapid  increase  in  the  number  of 
steam  power  industries,  all  combined  to 
open  a  field  for  capital  in  the  manufactur- 
ing, mining  and  transportation  industries, 
unparalleled  in  the  history  of  the  world. 
Compared  to  the  industrial  transformation 
thus  produced  the  industrial  changes  inci- 
dent to  the  introduction  of  steam  power 
and  the  factory  system  before  mentioned, 
which  has  been  called  the  Industrial  Rev- 
olution, were  of  trivial  importance,  as 
measured  by  the  amount  of  capital  in- 
volved, the  number  of  persons  employed, 
and  the  results,  as  affecting  the  industrial 
and  commercial  future  of  society.  In  every 
stage  of  its  development,  however,  and  in 
every  department  of  industry  into  which  it 
has  entered,  the  activities  of  capitalism 
have  been  characterized  by  the  same  faults, 

^Evolution  of  Industrial  Society,  by  Richard  T.  Ely,  page 
59. 


20        OPERATIVE  OWNERSHIP 

which  it  has  manifested  in  greater  or  lesser 
measure  according  to  the  degree  of  free- 
dom with  which  it  has  been  permitted  to 
pursue  its  own  methods  in  its  dealings  with 
the  laboring  classes,  the  agencies  of  gov- 
ernment, and  the  general  public. 

The  most  pernicious  of  the  faults  of  cap- 
italism, regarded  from  the  viewpoint  of 
their  effects  upon  the  general  well-being  of 
society,  is  the  manner  in  which,  when  left 
to  themselves,  capitalists  in  general — 
though  with  some  admirable  exceptions — 
dealt  with  their  employees.  In  their  inordi- 
nate greed  of  gain  they  have,  speaking 
generally,  regarded  neither  the  lives,  the 
health  nor  the  moral,  physical  or  social 
well-being  of  their  employees.  Until  for- 
bidden to  do  so  by  law  or  restrained  by  the 
power  of  organized  labor,  capitalist  em- 
ployers required  their  employees  to  work 
under  unsanitary  conditions,  and  neglected 
in  many  cases  to  provide  suitable  safety 
appliances  to  protect  them  from  danger  of 
accidents  by  exposed  or  otherwise  danger- 
ous conditions  of  machinery  or  places  for 
work. 

SCANTINESS  OF  WAGES. 

In  the  matter  of  wages  the  smallest 
amount  which  the  worker  could  be  induced 
or  forced  to  accept  has  generally  been  the 


THE  CLASS  STRUGGLE          21 

measure  of  his  remuneration.  Until,  by  the 
power  of  organization,  the  laborer  was  en- 
abled to  wrest  from  his  employer  some- 
thing more  than  enough  to  supply  the  bare 
necessities  of  life,  that,  and  scarcely  that, 
was  all  he  received.  Even  with  the  power 
of  organized  labor  behind  him  the  average 
wage  earner  today  receives  less  than  a  de- 
cent living  wage.  In  consequence  of  this 
condition  the  working  classes  of  today  are 
compelled  to  submit  to  a  low  standard  of 
living  in  the  midst  of  comforts  and  lux- 
uries, the  products  of  their  labors,  which 
may  be  seen  on  every  hand,  for  the  enjoy- 
ment of  the  middle  and  upper  classes — as 
rated  by  financial  standards — but  in  which 
comforts  and  luxuries  the  classes  which 
produce  them  are  rarely  or  never  permitted 
to  share. 

But  scant  as  are  his  wages  at  best,  and 
meager  as  is  the  subsistence  which  they 
afford,  the  earnings  of  the  average  wage- 
worker  are  still  further  reduced  by  unem- 
ployment. Without  tools  in  the  form  of  ma- 
chinery, the  worker  in  modern  industrial 
operations  can  do  nothing.  But  the  tools 
belong  to  the  capitalist,  who  will  not  allow 
them  to  be  used  unless  he  can  realize  a 
profit  on  the  worker's  labor  in  addition  to 
a  fair  interest  on  his  own  capital.  Disre- 


22        OPERATIVE  OWNERSHIP 

garding  the  economic  law  that  cheapness 
of  a  given  commodity  tends  to  create  a  de- 
friand  for  it,  the  average  capitalist  would 
close  his  establishment  when  business  is 
slack,  and  wait  for  the  demand  to  come 
from  scarcity  of  supply  (though  the  oper- 
atives starve  in  the  meantime),  rather  than 
forego  his  profits  or  lower  his  interest. 

Industrial  production  goes  on  increasing 
from  year  to  year,  under  the  capitalistic 
regime,  piling  up  for  the  few,  colossal  for- 
tunes wrought  out  of  the  blood  and  sweat 
and  bone  and  muscle  of  the  many,  while  the 
average  wage-worker  lives  from  hand  to 
mouth,  no  better  off  at  the  end  of  the  year 
than  he  was  at  the  beginning,  but  one  year 
nearer  to  the  inevitable  time  when,  no 
longer  able  to  do  a  man's  work,  he  will  be 
rejected — "scrapped,"  like  a  worn  out  ma- 
chine— and  doomed  to  drag  out  the  remain- 
der of  his  miserable  life  as  a  dependent 
upon  the  filial  duty  of  his  children,  or  upon 
the  charity  of  some  more  distant  relative, 
or  the  still  colder  "charity"  of  the  poor- 
house. 

A  DECENT  LIVING  WAGE. 

I  said,  in  a  preceding  paragraph,  that  the 
average  wage  worker  of  today  receives  less 
than  a  decent  living  wage,  and  as  a  result 
is  compelled  to  submit  to  a  low  standard 


THE  CLASS  STRUGGLE  23 

of  living  as  compared  to  the  manner  of  liv- 
ing affected  by  persons  of  higher  rank  in 
a  financial  sense.  I  realize  that  standards 
of  living  are  relative  matters,  and  vary 
with  the  time,  the  place  and  the  state  of 
civilization  that  is  in  mind.  It  is  to  be  un- 
derstood that  reference  is  here  made  to 
present  day  standards  of  civilization  in 
America.  The  accuracy  of  the  statement 
further  depends  upon  what  constitutes  a 
living  wage,  for  as  to  that  there  is  room 
for  a  wide  diversity  of  opinion.  It  is  im- 
portant, therefore,  for  the  sake  of  clearness 
that  some  space  be  given,  in  this  connec- 
tion, to  a  discussion  of  the  question:  What 
constitutes  a  living  wage  and  a  proper 
standard  of  living  for  the  American  work- 
ingman? 

Mr.  John  Mitchell,  formerly  president  of 
the  United  Mine  Workers  of  America,  in 
his  book,  Organized  Labor*  says:  "The 
American  standard  of  living  of  the  year 
1903  is  a  different,  a  better,  and  a  higher 
standard  than  the  American  standard  of 
living  of  the  year  1803.  The  American 
workman  of  the  present  day  is  a  better 
workman,  more  intelligent,  more  industri- 
ous, more  efficient  than  his  forefathers  of 
a  hundred  years  ago.  .  .  .  While  the 

*Pages  115-119. 


24        OPERATIVE  OWNERSHIP 

standard  of  living  has  risen,  it  has  not  by 
any  means  kept  pace  with  the  increased 
productivity  of  labor."  The  workman  of 
today  is  therefore,  relatively  to  his  pro- 
ductive power,  worse  off  than  was  his  pro- 
totype of  a  century  ago. 

Speaking  of  the  standard  of  living  that 
should  obtain  among  the  laboring  classes 
in  America,  Mr.  Mitchell  says:  "In  cities 
of  from  five  thousand  to  one  hundred  thou- 
sand inhabitants  the  American  standard  of 
living  should  mean,  to  the  ordinary  un- 
skilled workman  with  an  average  family,  a 
comfortable  house  of  at  least  six  rooms. 
It  should  mean  a  bathroom,  good  sanitary 
plumbing,  a  parlor,  dining-room,  kitchen 
and  sufficient  sleeping  room  that  decency 
may  be  preserved  and  a  reasonable  degree 
of  comfort  maintained.  The  American 
standard  of  living  should  mean  to  the  un- 
skilled workman,  carpets,  pictures,  books, 
and  furniture  with  which  to  make  home 
bright,  comfortable  and  attractive  for  him- 
self and  family,  an  ample  supply  of  cloth- 
ing, suitable  for  winter  and  summer,  and 
above  all  a  sufficient  quantity  of  good, 
wholesome,  nourishing  food  at  all  times  of 
the  year.  The  American  standard  of  living, 
moreover,  should  mean,  to  the  unskilled 
workman,  that  his  children  should  be  kept 


THE  CLASS  STRUGGLE          25 

in  school  until  they  have  attained  the  age 
of  sixteen  at  least,  and  that  he  be  enabled 
to  lay  by  sufficient  to  maintain  himself  and 
his  family  in  times  of  illness,  or  at  the  close 
of  his  industrial  life,  when  age  and  weak- 
ness render  further  work  impossible,  and 
to  make  provision  for  his  family  against 
his  premature  death  from  accident  or  oth- 
erwise." The  rate  of  wages  at  which  this 
standard  could  be  maintained  was  esti- 
mated by  Mr.  Mitchell  to  be  not  less  than 
$600  per  year  in  communities  between  the 
limits  of  population  above  mentioned.  In 
view  of  the  great  advance  in  the  cost  of 
living  since  Mr.  Mitchell's  book  was  writ- 
ten (1903)  it  is  doubtful  if  this  standard 
could  be  maintained  now  on  $800  a  year. 

ELEMENTS  OF  A  LIVING  WAGE. 

Dr.  John  A.  Ryan,  in  his  excellent  work, 
'A  Living  Wage,  reviews  the  descriptions 
and  definitions  of  a  number  of  economists 
as  to  what  constitutes  a  living  wage,  among 
which  there  is  none  that  is  at  once  more 
terse,  more  complete  and  more  accurate 
than  that  of  President  Gompers  of  the 
American  Federation  of  Labor.  He  de- 
fines a  living  wage  as  "A  wage,  which, 
When  expended  in  the  most  economical 
manner  shall  be  sufficient  to  maintain  an 


26        OPERATIVE  OWNERSHIP 

average  sized  family  in  a  manner  consist- 
ent with  whatever  the  contemporary  local 
civilization  recognizes  as  indispensable  to 
physical  and  mental  health,  or  as  required 
by  the  rational  self-respect  of  human  be- 
ings." Dr.  Ryan  discusses  categorically 
the  most  essential  requisites  of  a  living 
wage,  and  concludes  that  food,  clothing, 
shelter,  mental  and  physical  culture,  life 
and  accident  insurance — all  in  a  reasonable 
degree — are  essential  elements  of  a  de- 
cent livelihood.  Remuneration  inadequate 
to  secure  all  of  these  things  to  the  laborer 
and  his  family,  falls  below  the  require- 
ments of  a  living  wage. 

Professor  Albion  W.  Small,  while  at  the 
head  of  the  Department  of  Sociology  of  the 
University  of  Chicago,  declared,  as  quoted 
by  Dr.  Ryan,*  that:  "No  man  can  live, 
bring  up  a  family  and  enjoy  the  ordinary 
human  happiness  on  a  wage  of  less  than  a 
thousand  dollars  a  year." 

Dr.  Ryan  after  an  exhaustive  discussion 
of  the  elements  that  enter  into  a  living 
wage,  expressed  in  terms  of  money,  and 
without  distinction  between  skilled  and  un- 
skilled labor,  gives  his  own  conclusions, 
with  characteristic  conservatism,  as  to 
what  constitutes  a  living  wage,  to  the  effect 

*A  Living  Wage,  by  John  A.  Ryan,  page  136. 


THE  CLASS  STRUGGLE  27 

that  in  any  of  the  cities  of  the  United 
States  anything  less  than  $600  per  year  is 
not  a  Living  Wage;  that  this  sum  is  prob- 
ably a  Living  Wage  in  those  cities  of  the 
Southern  states  in  which  the  principal 
necessaries  of  life  are  cheaper  than  in  the 
North;  that  it  is  possibly  a  living  wage  in 
cities  of  moderate  size  in  the  West,  North 
and  East;  and  that  in  some  of  the  largest 
cities  of  the  last  named  sections  it  certainly 
is  not  a  living  wage.  In  the  ten  years  since 
Dr.  Ryan's  book  was  published  (1906)  the 
cost  of  living  has  increased,  at  a  low  esti- 
mate, twenty-five  per  cent,  so  that  the  same 
standard  of  living  which  Dr.  Ryan  then 
estimated  to  cost  $600  a  year  can  not  now 
be  maintained  under  $750. 

Having  described  the  content  of  a  living 
wage  and  defined  it  in  terms  of  money,  in 
a  manner  which,  if  it  be  open  to  criticism, 
it  must  be  on  the  grounds  of  excessive  con- 
servatism, Dr.  Ryan  proceeds  to  estimate 
the  proportion  of  wage  earners  in  several 
industries  who  fail  to  receive  a  living  wage. 
He  shows  by  computation  based  upon  a  spe- 
cial report  of  the  twelfth  census  (1900)  on 
Employees  and  Wages,  comprising  thirty- 
four  "stable  and  normal  industries"  classi- 
fied under  the  general  heads  of  textile, 
wood-working,  metal-working  and  miscel- 


28        OPERATIVE  OWNERSHIP 

laneous,  that  sixty-six  per  cent,  of  the 
adult  males  received  less  than  a  living 
wage.  He  further  shows,  by  a  similar  com- 
putation based  upon  the  figures  given  in 
the  sixteenth  annual  report  of  the  Inter- 
state Commerce  Commission,  relating  to 
the  1,302,494  railway  employes — exclusive 
of  officers — that  seventy-two  per  cent,  of 
the  adult  males  failed  to  receive  a  living 
wage. 

FALSE  PHILANTHROPY. 

When  so  large  a  proportion  of  the  labor- 
ing classes  of  the  United  States  are  com- 
pelled to  subsist  upon  a  wage  which  falls 
below  the  requirements  of  a  decent  liveli- 
hood, while  millionaires  multiply  and  man- 
ufacturers amass  enormous  fortunes  by  the 
profits  of  unrequited  labor,  and  flaunt  their 
wealth  with  unseemly  prodigality  in  the 
faces  of  the  oft-times  hungry  and  ragged 
workers  whose  hands  created  it,  or  pose  as 
philanthropists,  while  building  to  them- 
selves monuments  in  the  form  of  library 
buildings,  colleges,  universities  and  philan- 
thropic foundations,  endowed  with  such 
wealth  as  to  make  the  fabled  riches  of 
Croesus  seem  insignificant  by  comparison, 
with  never  a  thought  of  the  workers  whose 
sweat  and  blood  and  muscle  they  have  trans- 
muted into  gold  by  the  alchemy  of  capital- 


THE  CLASS  STRUGGLE          29 

ism,  it  is  little  wonder  that  social  unrest 
and  discontent  exist 

When  it  is  said  that  a  very  large  per- 
centage of  wage  earners,  as  shown  by  Dr. 
Ryan,  earn  less  than  a  living  wage,  it  is 
not  to  be  understood  that  the  average  of 
those  whose  wages  fall  below  that  line  re- 
ceive anything  near  the  sum  which  Dr. 
Ryan  estimates  as  the  minimum  living 
wage.  Professor  Scott  Nearing  in  his  val- 
uable study  of  wage  statistics  entitled 
"Wages  in  the  United  States,"  shows  that 
in  that  portion  of  the  United  States 
east  of  the  Rocky  Mountains  and  north 
of  Mason  and  Dixon's  line  75  per  cent, 
of  the  adult  male  employees  and  95  per 
cent,  of  the  adult  female  employees  re- 
ceive annually  less  than  $600;  that  50  per 
cent,  of  the  adult  males  and  90  per  cent,  of 
the  adult  females  receive  annually  less  than 
$500;  that  10  per  cent,  of  the  adult  males 
and  35  per  cent,  of  the  adult  females  receive 
less  than  $325  annually;  and  that  20  per 
cent,  of  the  adult  females  receive  less  than 
$200  per  annum. 

It  is  chiefly  the  insufficiency  of  the  la-  ; 
borers'  wage  which  lies  at  the  bottom  of  ; 
the  class  struggle.    If  what  is  a  matter  of  \ 
common  knowledge  can  be  any  more  firmly 
established  as  a  fact  by  a  citation  of  high 


30        OPERATIVE  OWNERSHIP 

authority,  we  have  the  declaration  of  the 
Federal  Commission  on  Industrial  Rela- 
tions, speaking  by  its  Chairman,  Mr.  Frank 
P.  Walsh,  in  its  report  to  Congress  (Au- 
gust, 1915),  to  the  effect  that  low  wages  is 
the  basic  cause  of  the  prevailing  unrest  and 
discontent  among  the  working  classes. 

"We  find  the  basic  cause  of  industrial  dis- 
satisfaction to  be  low  wages,"  writes  Mr. 
Walsh,  in  the  report  above  mentioned,  and 
he  adds:  "We  further  find  that  unrest 
among  the  workers  in  industry  has  grown 
to  proportions  that  already  menace  the  so- 
cial good  will  and  the  peace  of  the  nation." 

EXTREME  POVERTY  OF  THE  WORKING  CLASSES. 

The  limits  of  this  chapter  forbid  a  more 
exhaustive  treatment  of  this  branch  of  my 
subject,  but  I  would  refer  any  one  who 
would  learn  more  of  the  real  depths  in 
which  a  large  number  of  the  laboring 
classes  lives  under  the  regime  of  capitalism 
to  read  some  of  the  works  which  treat  of 
the  condition  of  the  laboring  classes, 
among  which  I  would  particularly  mention 
Poverty,  by  Robert  Hunter,  and  How  the 
Other  Half  Lives,  by  Jacob  Riis. 

A  perusal  of  these  works  will  disclose 
such  conditions  of  wretchedness  and  misery 
in  the  lower  stratum  of  the  laboring  classes 


THE  CLASS  STRUGGLE          31 

in  the  large  cities  of  America,  that  the 
crowded,  reeking,  noisome  tenements  de- 
scribed by  Gaskell  in  his  work  above  re- 
ferred to,  and  the  ill-clad,  ill-fed,  ill-paid, 
despairing  wretches  who  inhabited  them 
and  which  were  the  ordinary  products  of 
wage-capitalism  during  its  earlier  years  in 
England,  will  seem  to  have  their  counter- 
parts in  the  United  States  today  in  the 
stratum  above  mentioned. 

It  is  not  to  be  denied  that  the  condition 
of  the  average  wage  earner  today  is  vastly 
improved  as  compared  to  the  average  fac- 
tory operative  of  three-fourths  of  a  century 
ago,  or  that  could  the  factory  workers  of 
that  time  have  been  permitted  to  work  at 
the  rate  of  wages  and  under  the  conditions 
of  labor  which  obtain  today  for  the  same 
class  of  labor,  they  would  have  thought 
themselves  a  happy  lot  of  people.  But  the 
workers  of  today  are  an  educated,  intelli- 
gent, class-conscious  and  self-assertive 
class,  with  ^a  higher  and  juster  conception 
of  their  rights,  as  workers  and  as  human 
beings.  The  change  in  the  social  condition 
of  the  working  class  within  the  period  men- 
tioned is  not  so  great  as  the  change  in  the 
intellectual  status  of  the  average  individual 
of  that  class  and  in  his  conception  of  the 
rights  of  his  class,  as  the  real  producers  of 


32        OPERATIVE  OWNERSHIP 

the  world's  wealth.  Nor  has  the  increase 
in  his  wages  within  the  period  before  men- 
tioned, kept  pace  with  the  increased  pro- 
ductiveness of  his  labor;  for  with  every  im- 
provement in  the  processes  of  industrial 
production  whereby  the  produce  of  labor 
has  been  increased  in  quantity  or  value,  the 
lion's  share  of  the  increase  has  always  been 
appropriated  by  the  capitalist 

"Now  more  than  ever/'  writes  Chairman 
Frank  P.  Walsh,  of  the  Commission  on  In- 
dustrial Relations,  "the  profits  of  great  in- 
dustries under  centralized  control  pour  into 
the  coffers  of  stockholders  and  directors, 
who  never  have  so  much  as  visited  the 
plants,  and  who  perform  no  service  in  re- 
turn. And  while  vast  inherited  fortunes, 
representing  zero  in  social  service  to  the 
credit  of  their  possessors,  automatically 
treble  and  multiply  in  volume,  two-thirds 
of  those  who  toil  from  eight  to  twelve  hours 
a  day  receive  less  than  enough  to  support 
themselves  and  their  families  in  decency 
and  comfort.  From  childhood  to  the  grave 
they  dwell  in  the  shadow  of  fear  that  their 
only  resource — their  opportunity  to  toil — 
will  be  taken  from  them  through  accident, 
illness,  the  caprice  of  a  foreman  or  the  for- 
tunes of  industry.  The  lives  of  their  babies 
are  snuffed  out  by  bad  air  in  cheap  lodg- 


THE  CLASS  STRUGGLE          33 

ings,  and  the  lack  of  nourishment  and  care 
which  they  cannot  buy.  Fathers  and  hus- 
bands die  or  are  maimed  in  accidents,  and 
their  families  receive  a  pittance,  or  succumb 
in  mid-life,  and  they  receive  nothing."* 

APPALLING  INFANT  MORTALITY. 

Of  the  appalling  rate  at  which  the  lives  of 
babies  are  being  snuffed  out  by  the  means 
mentioned  by  Chairman  Walsh,  some  idea 
may  be  formed  from  the  following  para- 
graph taken  from  the  report  of  Basil  M. 
Manly,  Director  of  Research  and  Investiga- 
tion of  the  above  mentioned  Commission: 

"It  has  been  proved  by  studies  here  and 
abroad  that  there  is  a  direct  relation  be- 
tween poverty  and  the  death  rate  of  babies; 
but  the  frightful  rate  at  which  poverty  kills 
was  not  known,  at  least  for  this  country, 
until  very  recently,  when,  through  a  study 
made  in  Jamestown,  Pa.,  by  the  Federal 
Children's  Bureau,  it  was  shown  that  the 
babies  whose  fathers  earned  less  than  $10 
per  week  die  during  the  first  year  at  the  ap- 
palling rate  of  256  per  1,000.  On  the  other 
hand,  those  whose  fathers  earned  $25  per 
week  or  more  died  at  the  rate  of  84  per  1,- 
000.  The  babies  of  the  poor  died  at  three 

^Supplementary  statement  of  Chairman  Frank  P.  Walsh 
appended  to  the  Commission  Report. 


34        OPERATIVE  OWNERSHIP 

times  the  rate  of  those  who  were  in  fairly 
well-to-do  families.  The  tremendous  signifi- 
cance of  these  figures  will  be  appreciated 
when  it  is  known  that  one-third  of  all  the 
adult  workmen  reported  by  the  Immigra- 
tion Commission  earned  less  than  $10  per 
week,  even  exclusive  of  time  lost.  On  the 
showing  of  Jamestown  these  workmen  may 
expect  one  out  of  four  of  their  babies  to  die 
during  the  first  year  of  life."** 

UNCERTAINTY   OF   EMPLOYMENT. 

Next  to  the  universal  insufficiency  of 
wages  perhaps  the  most  distressing  of  the 
evils  attendant  upon  the  wage  system  is  that 
of  the  uncertainty  of  employment  under  it. 
Loss  of  employment  may  result,  temporarily 
or  permanently,  from  such  a  variety  of 
causes — a  season  of  business  depression;  the 
change  of  the  seasons;  the  disfavor  of  a 
foreman  or  superintendent;  accident,  sick- 
ness or  advancing  age ;  the  introduction  of 
new  machinery,  and  many  others,  that  al- 
most every  wage  earner  in  the  manufactur- 
ing, mining,  transportation,  building,  mer- 
cantile and  many  other  branches  of  indus- 
try, lives  in  constant  danger  of  it. 

This  uncertainty  is  ever  present  to  the 
mind  of  the  wage-worker  burdened  with  the 

**Report  of  Commission  on  Federal  Relations,  page  12. 


THE  CLASS  STRUGGLE          35 

ordinary  responsibilities  of  life.  It  takes 
the  cup  of  joy  from  the  lips  of  love  and  re- 
places it  with  the  gall  and  wormwood  of 
doubt  and  fear.  Sleeping  and  waking  the 
wage-earner  with  a  dependent  family  is 
ever  haunted  by  the  fear  of  want  and  suf- 
fering for  those  he  loves,  who  are  depend- 
ent upon  him.  To  the  wage-worker  not  so 
burdened,  the  holiest,  tenderest  and  dearest 
relations  of  life — those  of  marriage  and 
parenthood — are  made  to  appear  as  things 
to  be  shunned  and  dreaded,  and  many  are 
deterred  by  this  uncertainty  from  realizing 
the  highest  purpose  of  human  life;  for,  as 
the  poet  Burns  has  truly  said, 

"To  make  a  happy  fireside  clime 

To  weans  and  wife, 
That's  the  true  pathos  and  sublime 
Of  human  life." 


Uncertainty  of  employment  will  never  be 
eliminated  so  long  as  the  question  of  em- 
ployment depends  on  the  will  of  an  employ- 
er rather  than  that  of  the  worker;  nor  is 
any  remedy  possible  for  such  uncertainty 
which  does  not  place  the  means  of  employ- 
ment in  the  control  of  the  workers. 


36        OPERATIVE  OWNERSHIP 

THE  WORKERS  ORGANIZE. 

The  natural  result  of  the  conditions  de- 
scribed in  the  foregoing  pages  has  been  to 
increase  the  discontent  of  the  average 
workingman  with  his  lot,  and  to  intensify 
the  feeling  of  hostility  with  which  he  re- 
gards the  system  which  operates  to  keep 
him  forever  in  hopeless  poverty  while  his 
exploiters  wax  rich  and  ever  richer  upon 
the  products  of  his  labor  and  that  of  his  fel- 
low workers. 

Not  without  a  struggle,  however,  have 
the  laboring  classes  submitted  to  the  ex- 
ploitation of  which  they  have  so  long  been 
the  victims.  In  our  day,  to  a  greater  de- 
gree than  in  any  preceding  time,  the  labor- 
ing classes  have  achieved  a  degree  of  soli- 
darity in  their  age-long  struggle  for  the  bet- 
terment of  their  condition,  that  promises, 
at  no  distant  day,  their  complete  emancipa- 
tion from  the  bondage  of  capitalism. 

From  the  remotest  times  of  which  we 
have  any  historical  record,  down  through 
the  civilizations  of  ancient  Egypt,  Greece, 
and  Rome,  through  the  feudalism  of  medie- 
val Europe  and  the  universal  commercial- 
ism of  modern  times,  society  has  been  di- 
vided with  relation  to  the  production  of  the 
things  which  minister  to  human  needs,  into 
two  classes,  namely,  a  ruling  and  a  serving 


THE  CLASS  STRUGGLE          37 

class.  The  former  has  always  been  numer- 
ically small  in  comparison  with  the  latter, 
and  has  ruled  by  virtue  of  its  possession  of 
wealth  or  military  power.  The  relations 
between  these  classes,  in  the  several  stages 
of  the  world's  history,  are  indicated  by  the 
terms  master  and  slave,  master  and  serv- 
ant, lord  and  serf,  employer  and  employee. 
Their  mutual  relations  have  been  character- 
ized, for  the  most  part,  by  oppression,  and 
at  times  by  cruel  and  inhuman  brutality  on 
one  side,  and  on  the  other,  by  patient  sub- 
mission, varied  at  intervals  by  uprisings  and 
revolts,  marked  by  riot,  arson,  rapine  and 
bloodshed. 

Historians  have  given  little  attention  to 
the  manner  of  living,  or  to  the  murmurings 
of  the  laboring  classes  during  the  periods 
covered  by  ancient  and  medieval  history; 
choosing  rather  for  their  subjects  the  do- 
ings of  the  smaller  but  more  powerful  ruling 
classes  which  have  more  directly  contrib- 
uted to  the  important  historical  events  of 
those  times.  For  that  which  has  passed  for 
history  is,  generally  speaking,  but  the  his- 
tory of  the  ruling  classes.  There  are,  how- 
ever, scattered  through  this  history  suffi- 
cient references  to  the  conditions  of  the 
laboring  masses  to  show  that  they  have  had, 
at  all  times,  a  realizing  sense  of  their 


38        OPERATIVE  OWNERSHIP 

wrongs;  that  they  have  hoped  and  strug- 
gled unceasingly  for  the  righting  of  them ; 
and  that  their  struggles  have,  in  innumer- 
able instances,  taken  the  form  of  acts  of 
violence  and  bloodshed  of  a  most  appalling 
character. 

Within  the  present  generation  the  class 
struggle  has  grown  more  intense  than  at 
any  previous  time  in  the  world's  history. 
World-wide  in  extent,  the  struggle  today 
involves  on  one  side  the  forces  of  labor  or- 
ganized like  vast  armies,  equipped,  mobil- 
ized and  ready  for  attack  against  a  com- 
mon foe,  and  on  the  other  the  forces  of  cap- 
ital, all  but  as  thoroughly  organized,  and 
ready  to  make  or  to  resist  attack,  as  the  oc- 
casion may  demand.  Indeed,  it  may  be  said 
that  rarely  if  ever  are  the  opposing  powers 
entirely  at  peace,  for  somewhere  in  the 
world  of  industry  a  battle  is  always  in  prog- 
ress; often  many  battles  are  going  on  at  one 
and  the  same  time.  These  battles  usually 
take  the  form  of  strikes  or  lockouts,  and 
while  generally  peaceful,  they  are  often  at- 
tended by  riot  and  bloodshed,  and  in  very 
many  cases  by  great  public  inconvenience. 

Mr.  Carroll  D.  Wright,  whose  means  of 
information  on  that  subject  were  unex- 
celled, writing  in  1906,  said  that  "probably 
more  strikes  and  lockouts,  and  labor  dis- 


THE  CLASS  STRUGGLE  39 

turbances  generally,  have  occurred  during 
the  last  twenty-five  or  thirty  years  than  in 
all  the  previous  period  from  the  dawn  of 
the  Christian  era."* 

STRIKES  AND  THEIR  COST. 

The  economic  loss  resulting  from  these 
strikes  is  startling  in  its  magnitude.  In  the 
25-year  period  from  1881  to  1905,  inclusive, 
there  were,  in  the  United  States  alone,  36,- 
757  strikes  and  1,546  lockouts,  making  a 
total  of  38,303  disturbances  involving  a  ces- 
sation of  labor.  The  total  number  of  per- 
sons who  quit  work,  or  were  locked 
out  from  work,  within  that  period  was 
7,444,279.  The  total  number  of  days 
labor  lost  was  290,923,735.**  The  aver- 
age number  of  wage-earners  in  all  manu- 
facturing industries  in  the  United  States 
in  1905  was  5,470,321  and  the  total  amount 
of  wages  paid  $2,611,540,532.***  A  simple 
computation  based  upon  these  figures,  and 
counting  52  weeks  of  6  working  days  each 
to  the  year,  will  show  that  the  average  daily 
wages  paid  in  all  manufacturing  industries 
in  1905  was  $1.53.  Now  if  we  compute  the 
290,923,735  days  lost  in  strikes  and  lockouts 


*The  Battles  of  Labor,  page  76. 

**Computed  from  Report  of  Commissionars  of  Labor,  U. 
S.f  1906,  page  12. 

***Bulletin  37,  Census  of  Manufacturers,  1905. 


40        OPERATIVE  OWNERSHIP 

at  this  rate  per  day  we  shall  have  a  total 
loss  in  wages  of  $445,113,314.55.  But  this  is 
only  a  small  part  of  the  economic  loss.  The 
data  for  computation  of  the  indirect  losses 
are  insufficient  to  produce  any  accurate  re- 
sults. Some  idea  may,  however,  be  formed 
in  regard  to  them  from  an  examination  of 
the  indirect  losses  resulting  from  certain 
other  strikes  in  which  such  losses  have  been 
ascertained  with  reasonable  accuracy.  For 
this  purpose  the  anthracite  coal  strike  of 
1902  will  serve  as  well,  perhaps,  as  any  oth- 
er. This  strike  lasted  from  May  12  to  Octo- 
ber 23,  1902;  about  147,000  mine  workers 
quit  work.  The  loss  to  employees  in  wages 
was  upwards  of  $25,000,000;  the  coal  com- 
panies lost,  in  decrease  in  receipts,  $46,000,- 
000 ;  there  was  spent  in  relief  of  the  miners 
$1,800,000  and  there  was  lost  to  the  railway 
companies  in  decrease  of  receipts  from 
freight  $47,000,000.* 

The  total  indirect  losses  thus  shown  as 
ascertainable,  in  addition  to  the  direct  loss 
to  employees,  is  $124,800,000,  or  approxi- 
mately five  times  the  amount  lost  in  wages 
to  the  strikers.  If  to  the  $445,000,000  of 
direct  losses  in  wages,  during  the  25-year 
period  before  mentioned,  we  add  the  indi- 
rect losses  in  the  same  ratio  shown  in  the 

*The  Battles  of  Labor,  by  Carrol  D.  Wright,  p.  148. 


THE  CLASS  STRUGGLE          41 

anthracite  strike,  we  shall  have  a  total 
economic  loss,  directly  and  indirectly,  of 
$2,670,679,887.  This  was  more  than  the  na- 
tional debt  incurred  in  financing  the  war  of 
the  rebellion. 

In  addition  to  those  items  of  indirect  loss 
already  enumerated  there  are  others  which 
occur  in  very  many  strikes,  the  nature  of 
which  does  not  afford  any  reliable  data  for 
calculation  as  to  their  amount.  Thus  in  the 
brickmakers'  strike  in  Chicago  in  1914  the 
number  of  persons  directly  involved  in  the 
strike  was  only  2,000.  But  the  strike  caused 
a  suspension  of  all  building  operations  in 
that  city,  throwing  150,000  men  out  of  em- 
ployment, and  involving  an  economic  loss 
directly  and  indirectly,  which  was  roughly 
estimated  in  the  local  press  at  a  million  dol- 
lars a  day.* 

In  very  many  cases,  strikes  were  attended 
with  rioting  and  other  forms  of  disorder 
which  necessitated  the  use  of  the  police  and 
military  forces  of  the  municipality  or  state, 
involving  great  expense.  Thus,  the  State  of 
Colorado  expended  over  $1,000,000  in  the 
suppression  of  disorder  arising  out  of  the 
labor  disturbances  in  that  state  from  1880 
to  1904. 


^Chicago  Tribune,  June  3,  1914. 


42        OPERATIVE  OWNERSHIP 

EXORBITANT  TOLL  OF  WAGE-CAPITALISM. 

Yet  another  source  of  loss  too  often  over- 
looked in  counting  the  costs  of  labor  dis- 
turbances is  the  diminution  of  efficiency 
of  the  employees.  Every  strike  or  lockout, 
especially  where  it  is  of  long  duration,  and 
the  struggle  becomes  severe,  leaves  the  em- 
ployees with  a  feeling  of  bitterness  towards 
the  employer  which  is  certain  to  militate 
against  the  employees'  efficiency.  It  is  not  in 
human  nature  for  an  employee  to  give  the 
same  degree  of  care  and  diligence  to  the 
service  of  a  master  whom  he  hates,  that  he 
would  give  to  that  of  one  towards  whom  he 
entertains  a  kindly  feeling.  Many  who  have 
•bserved  the  effects  of  kindly  treatment  of 
the  laborer,  or  of  special  reward,  as  in  the 
case  of  profit-sharing,  as  reflected  in  the 
quantity  and  quality  of  the  product  of  la- 
bor, have  attested  the  greater  efficiency  of 
the  employee  under  the  influence  of  these 
incentives,  and  have  variously  estimated 
the  ratio  of  increase  of  efficiency  at  from 
10  per  cent  to  33 1-3  per  cent  or  more. 

Thus  it  would  seem  that  in  the  various 
forms  of  economic  losses  above  mentioned, 
society,  through  the  wage-earner,  the  tax- 
payer, and  the  consumer  of  industrial 
products,  is  paying  an  exorbitant  toll  to  the 
institution  of  capitalism. 


CLASS  STRUGGLE.  43 

But  a  more  serious  matter  yet  remains  to 
be  mentioned.  It  is  the  threatened  subver- 
sion of  orderly  government  in  the  land. 
Year  by  year  the  fighting  strength  of  the 
opposing  forces  in  this  war  of  the  classes 
waxes  greater.  Every  new  battle  is  fiercer 
than  the  last,  as  the  contending  armies  be- 
come better  organized.  Intimidation,  vio- 
lence, riot,  arson,  murder  and  insurrection, 
involving  the  loss  of  many  lives,  have 
marked  the  struggle  between  the  opposing 
forces  in  several  recent  conflicts.  Within  the 
past  two  years  we  have  seen  armed  conflicts 
between  striking  wage-earners  and  the  civil 
and  military  forces  of  the  state  in  Michigan, 
Colorado,  West  Virginia  and  New  Jersey, 
in  which  many  lives  have  been  lost.  In  one 
case — that  of  the  coal  miners'  strike  in  Colo- 
rado—the loss  of  life  and  destruction  of 
property  was  on  such  a  scale  that  a  state 
of  civil  war  was  declared  to  exist,  and  the 
military  forces  of  the  United  States  were 
called  upon  to  restore  peace. 

"The  contest  between  capital  and  labor/' 
writes  Professor  John  R.  Commons  of  the 
Commission  on  Federal  Relations,  "is  more 
serious  than  any  of  the  other  contests.  Since 
the  year  1877  it  has  frequently  resulted 
practically  in  civil  war,  with  the  army  or 
militia  called  in  to  suppress  one  side  or  the 


44        OPERATIVE  OWNERSHIP 

other,  according  to  the  will  of  the  executive. 
It  is  claimed  by  some  that  this  contest  is 
irrepressible  and  will  end  in  revolution,  and 
at  least  it  is  plain  when  the  military  power 
is  called  upon  to  decide  a  contest,  that  the 
ordinary  machinery  of  government,  which 
is  fairly  successful  in  other  contests,  has 
broken  down."* 

A  REMEDY  OR  SOCIALISM. 

Many  thoughtful  men  in  every  walk  of 
life  are  able  to  see  the  trend  of  events,  and 
to  recognize  that  unless  some  means  is 
found  to  restore  industrial  peace,  and  to 
remedy  the  ills  which  we  have  seen  in  an 
earlier  part  of  this  chapter  to  be  the  direct 
result  of  wage-capitalism,  the  advent  of  So- 
cialism, which  promises  a  most  agreeable, 
and  superficially  plausible,  remedy  for  the 
ills  in  question,  cannot  be  long  delayed. 

To  avert  such  a  catastrophe  by  a  re- 
adjustment of  the  industrial  relations  of  so- 
ciety on  a  basis  of  social  and  industrial  jus- 
tice, and  in  a  manner  that  will  be  consistent 
with  the  existing  social  order,  and  will  oper- 

*Report  of  Commission  on  Industrial  Relations,  p.  326. 


CLASS  STRUGGLE.  45 

*> 

ate  to  restore  and  conserve  the  rights  of 
private  property  and  private  industry  as 
those  rights  have  existed  from  time  im- 
memorial until  within  a  comparatively  re- 
cent period,  will  be  the  aim  of  the  system 
which  will  be  proposed  and  explained  in  the 
following  chapters. 


CHAPTER  II. 

PROPOSED  REMEDIES  FOR  INDUS- 
TRIAL ILLS. 

SOCIALISM;  CO-OPERATION;  TRADE  UNIONISM, 

We  have  seen  in  the  preceding  chapter 
the  rise  and  development  of  wage-capital- 
ism, and  the  evils  which  have  arisen  there- 
from. Before  setting  forth  the  plan  which 
it  is  the  main  object  of  this  book  to  propose 
as  a  means  of  correcting  those  evils  it  is 
fitting  that  a  brief  examination  be  made  of 
the  most  important  of  the  agencies  which 
have  been  proposed,  and  to  a  greater  or 
lesser  extent  applied,  as  a  means  with  which 
to  combat  the  system  of  wage-capitalism 
and  the  evils  to  which  that  system  has  given 
rise.  The  agencies  in  question,  to  a  discus- 
sion of  which  the  present  chapter  will  be 
devoted,  are  Socialism,  Co-operation  and 
Trade  Unionism.  I  expect  to  show  that  in 
the  case  of  Socialism  it  aims  and  threatens 
to  overthrow  the  existing  social  order  with- 
out producing  any  compensating  benefit  to 
the  working  classes  or  to  society  in  general ; 
that  in  the  case  of  Co-operation,  while  in 
certain  of  its  phases  it  is  undoubtedly 

46 


REMEDIES  FOR  INDUSTRIAL  ILLS     47 

beneficial,  it  is  lacking  in  certain  respects 
which  make  it  impossible  that,  in  the 
present  state  of  the  laws,  it  will  ever 
be  able  to  effect  any  considerable  im- 
provement in  the  condition  of  the  laboring 
classes;  and  that,  in  the  case  of  Trade 
Unionism,  while  it  has  worked  immeasur- 
able benefit  to  the  laboring  classes,  and  will 
continue  to  do  so,  it  must  go  much  further 
than  its  advocates  at  present  seem  to  con- 
template, if  it  would  be  the  means  of  achiev- 
ing the  ultimate  destiny  of  the  laboring 
classes  under  an  industrial  system  in  which 
there  shall  be  neither  master  nor  servant  in 
industrial  establishments,  but  in  which  the 
workers  shall  collectively  own  the  capital, 
in  the  form  of  the  machinery  and  materials 
with  which  and  upon  which  they  work,  and 
carry  on  their  operations  under  the  direc- 
tion of  managers  appointed  and  removable 
by  themselves. 

SOCIALISM. 

The  limits  of  the  present  chapter  preclude 
a  general  discussion  of  the  question  of  So- 
cialism, and  compel  me  to  limit  the  discus- 
sion to  such  matters  as  bear  most  directly 
upon  the  interests  of  the  working  classes, 
and  upon  the  rights  of  private  property 
and  private  industry. 


48        OPERATIVE  OWNERSHIP 

Socialism  is  defined  as  "A  theory  of  civil 
polity  that  aims  to  secure  the  reconstruc- 
tion of  society,  an  increase  of  wealth,  and 
a  more  equal  distribution  of  the  products 
of  labor,  through  the  public  collective  own- 
ership of  land  and  capital  .  .  .  ,  and  the 
public  collective  management  of  all  indus- 
tries."* It  is  a  system  of  society  in  which 
all  the  means  of  production,  distribution 
and  exchange  of  the  necessaries  and  lux- 
uries of  life  are  to  be  owned  and  managed 
by  the  government,  national,  state  or  mu- 
nicipal, and  in  which  all  individual  rights 
are  supposed  to  be  derived  from  society. 

The  government,  as  the  owner  of  all  the 
land  and  the  houses  thereon,  is  to  be  the  uni- 
versal landlord.  As  the  owner  and  manager 
of  all  productive  industries,  it  will  be  the 
universal  employer  of  labor.  As  the  source 
of  all  individual  rights,  it  will  have  power 
to  control  and  regulate  the  personal  affairs 
of  the  individual  in  his  social,  his  domestic, 
his  religious  and  all  other  relations,  to  con- 
form to  the  views  of  the  majority,  which, 
as  to  all  things  and  at  all  times,  shall  be  su- 
preme. With  the  State  as  universal  land- 
lord, as  sole  employer  of  productive  labor 
and  as  general  director  of  what  we  now  con- 
sider the  private  affairs  of  the  individual, 

*The  Students  Standard  Dictionary. 


REMEDIES  FOR  INDUSTRIAL  ILLS     49 

the  status  of  the  most  abject  "wage-slave," 
toiling  his  life  away  in  the  service  of  some 
great  corporation,  is  a  veritable  dream  of 
liberty  by  comparison  with  that  of  the  in- 
dividual citizen  as  tenant,  servant  and  de- 
pendent all  in  one,  under  the  government  of 
such  a  state. 

SOCIALISM  AND  INDIVIDUALISM. 

A  better  understanding  of  the  nature  of 
things  may  often  be  gained  by  their  ex- 
amination in  comparison  with  their  oppo- 
sites.  The  opposite  of  Socialism  is  Indivi- 
dualism. In  the  Socialistic  theory  of  society 
the  State  is  paramount  in  all  human  rela- 
tions. The  individual  exists  primarily  as  a 
part,  and  for  the  use  of,  the  State,  possess- 
ing no  rights  or  privileges  natural  or  con- 
ventional, save  as  a  part  of  the  State.  "It 
is  only  by  being  a  citizen  of  a  well-ordered 
state,"  says  Hegel,  "that  the  individual  has 
got  rights." 

In  the  individualistic  theory  of  society 
the  individual  is  paramount,  and  the  State 
exists  to  protect  the  rights  of  the  individual 
in  person  and  property,  as  against  any  oth- 
er individual  who  might  attempt  to  invade 
those  rights,  as  well  as  to  protect  all  indi- 
viduals within  its  jurisdiction,  singly  and 
collectively,  from  foreign  enemies. 


50        OPERATIVE  OWNERSHIP 

The  Socialistic  theory  of  the  relation  of 
the  State  to  the  individual,  involving  the 
paramountcy  of  the  State  and  the  subor- 
dinacy  of  the  individual,  finds  expression 
today  in  government  control  and  regulation 
of  privately  owned  industry,  in  government 
ownership  and  operation  of  certain  indus- 
tries, in  the  demand  for  the  ultimate  own- 
ership and  operation  by  the  State  of  all  the 
instrumentalities  of  production,  and  in  the 
rapidly  growing  tendency  to  enlarge  the 
powers  and  functions  of  government,  and 
to  contract  the  rights,  and  curtail  the  free- 
dom of  action,  of  the  individual. 

The  individualistic  theory  of  the  para- 
mountcy of  the  individual,  and  the  doctrine 
that  the  State  exists  only  to  insure  and  pro- 
tect individual  rights,  though  not  always 
respected  in  practice,  was  universally  rec- 
ognized in  civilized  society  long  prior  to 
the  establishment  of  the  government  of  the 
United  States,  and  found  eloquent  expres- 
sion in  the  American  Declaration  of  Inde- 
pendence, wherein  it  is  declared  that  all 
men  are  endowed  by  the  Creator  with  cer- 
tain unalienable  rights,  including  the  rights 
to  life,  liberty  and  the  pursuit  of  happi- 
ness; and  that  to  secure  these  rights  gov- 
ernments are  instituted. 

The  individualistic  theory  of  the  relation 


REMEDIES  FOR  INDUSTRIAL  ILLS    51 

of  the  government  to  the  individual  could 
scarcely  be  more  clearly  stated.  If  that 
declaration  be  accepted,  it  follows  that  if, 
in  the  exercise  of  that  liberty  which  is  man's 
natural  right,  he  chooses  to  pursue  indus- 
try as  a  means  to  happiness,  it  is  the  proper 
function,  and  the  duty,  of  government  to 
insure  and  protect  that  right  rather  than 
to  impede  or  restrict  it.  A  denial  of  this 
proposition  involves  a  repudiation  of  the 
fundamental  principles  of  the  Declaration 
of  Independence. 

Conformably  to  this  theory  the  right  of 
the  individual  to  possess  property,  and  to 
freely  use,  control  and  dispose  of  his  poses- 
sions,  as  also  to  carry  on  all  manner  of 
productive  industry,  free  from  government 
interference,  save  in  so  far  as  such  inter- 
ference may  have  been  necessary  to  protect 
the  equal  rights  of  other  individuals,  was 
uniformly  recognized  in  America  from  the 
foundation  of  the  government  until  a  com- 
paratively recent  time.  During  all  this  time 
the  pursuit  of  industry  for  the  production 
of  wealth  was  deemed  the  proper  sphere  of 
individual,  as  distinguished  from  govern- 
mental, activity.  The  abandonment  of  this 
policy  and  the  adoption  of  a  policy,  advo- 
cated by  all  Socialists,  of  public  ownership 
of  industry,  when  such  ownership  is  not 


52        OPERATIVE  OWNERSHIP 

necessary  to  the  proper  performance  of 
governmental  functions,  is  an  adoption,  to 
that  extent,  of  the  principle  of  Socialism. 

PRESENT  AIM  OF  SOCIALISM. 

The  present  aim  of  Socialism,  through 
the  achievement  of  which  it  is  hoped  to  es- 
tablish the  Socialist  or  "Co-operative"  Com- 
monwealth, in  which  the  Socialist  ideal  is 
to  be  realized,  of  a  commonwealth  which 
shall  possess  all  the  land  and  all  the  capital, 
and  in  which  the  people  shall  be  tenants, 
employees  and  dependents  of  the  govern- 
ment, is  to  get  control  of  the  existing  po- 
litical machinery  of  society  and  use  it  to 
establish  the  Socialist  State.  This  pur- 
pose is  frankly  avowed  by  some  of  the 
foremost  speakers  and  writers  of  Socialism. 
In  a  book  entitled  The  War  of  the  Classes, 
by  Jack  London,  one  of  the  most  popular 
and  widely  read  of  Socialist  works,  that 
author,  with  admirable  candor,  says: 

"They  intend  to  direct  the  labor  revolt  to 
capture  the  political  machinery  of  society. 
With  the  political  machinery  in  their  hands, 
which  will  also  give  them  control  of  the 
army,  the  navy  and  the  courts,  they  will 
confiscate,  with  or  without  remuneration, 
all  the  possessions  of  the  capitalist  class 
which  are  used  in  the  production  and  dis- 


REMEDIES  FOR  INDUSTRIAL  ILLS     53 

tribution  of  the  necessaries  of  life.  .  .  . 
In  short  to  destroy  present  day  society, 
which  they  contend  is  run  in  the  interest  of 
another  class,  and  from  the  materials  to 
construct  a  new  society  which  will  be  run 
in  their  interest."* 

As  to  the  means  by  which  the  political 
machinery  of  society  is  to  be  captured,  So- 
cialistic opinion  is  not  united.  The  nearest 
approach  to  an  official  declaration  of  inten- 
tions in  that  regard  is  contained  in  the  So- 
cialist Platform  adopted  at  Indianapolis  in 
May,  1912,  as  follows: 

"Such  measures  of  relief  as  we  may  be 
able  to  force  from  capitalism  are  but  a 
preparation  of  the  workers  to  seize  the 
whole  powers  of  the  government,  in  order 
that  they  may  thereby  lay  hold  of  the  whole 
system  of  socialized  industry,  and  thus  come 
into  their  rightful  inheritance/' 

In  other  words,  every  concession  to  So- 
cialistic sentiment;  every  measure  for  the 
adoption  of  which  Socialists  contend,  includ- 
ing government  ownership  of  public  utili- 
ties and  mines  (which  measures  they  hope 
to  have  adopted  by  the  aid  of  many  persons 
who  would  disdain  to  be  called  Socialists), 
is  to  be  used  to  advance,  step  by  step,  the 

*The  War  of  the  Classes,  by  Jack  London,  p.  47. 


54        OPERATIVE  OWNERSHIP 

cause  of  Socialism  to  the  full  realization  of 
its  aims. 

TREND  TOWARD  SOCIALISM. 

We  are  approaching  a  state  of  Socialist 
domination  at  a  rapid  gait,  from  various 
angles  and  by  various  paths.  We  have  seen 
the  growing  tendency  in  that  direction  man- 
ifested by  government  activities  in  the  con- 
trol of  private  industry  and  by  the  growing 
demand  for  government  ownership  of  cer- 
tain classes  of  industries.  But  these  are 
by  no  means  the  only  manifestations  of  that 
tendency  that  are  observable.  Every  pro- 
tracted strike  or  lock-out,  with  the  bitter- 
ness and  class-hatred  which  it  engenders, 
and  more  especially  where  the  forces  of  la- 
bor suffer  defeat,  whether  total  or  partial, 
affords  a  profitable  field  for  the  activities 
of  Socialistic  propagandists,  who  find  little 
difficulty  in  making  converts. 

"The  men  who  come  to  us  now  from  towns 
where  they  have  been  thoroughly  whipped 
in  a  strike,  are  among  our  most  active  work- 
ing Socialists,"  said  the  Socialist  Mayor  of 
Brockton,  Mass.,  to  Professor  John  Graham 
Brooks,  as  related  by  that  distinguished 
writer  in  his  admirable  work,  The  Social 
Unrest*  Strikes  are  increasing  in  numbers 

*p.  65. 


REMEDIES  FOR  INDUSTRIAL  ILLS    55 

and  in  the  degree  of  bitterness  with  which 
they  are  waged;  and  every  strike  brings 
its  quota  of  converts  to  the  theories,  and 
workers  to  the  ranks,  of  Socialism. 

Another  means  by  which  the  goal  of  So- 
cialistic endeavor  may  be  reached,  or  which, 
at  the  opportune  time,  may  bring  to  the 
battle-front  the  factor  that  may  be  decisive 
in  the  conflict  between  the  forces  of  the  ex- 
isting social  order  and  those  of  Socialism, 
is  in  the  practice  of  the  workers  in  certain 
industries  to  organize  along  industrial 
lines,  i.  e.,  the  several  craft  unions  in  each 
industry  joining  in  one  large  union  of  that 
industry,  as  in  the  cases  of  the  United  Mine 
Workers,  the  Railway  Trainmen,  and  the 
like.  This  form  of  organization  is  the  one 
specially  advocated  by  that  section  of  the 
Socialist  organization  called  Syndicalists, 
or  Industrial  Workers  of  the  World,  as  lead- 
ing to  the  "One  Big  Union"  by  which  the 
industry  of  the  nation  may  be  crippled 
through  a  general  strike. 

A  few  years  ago  the  locomotive  engi- 
neers, for  example,  on  a  single  road,  would 
have  made  demands  upon  their  employer, 
and  perhaps,  would  have  struck  if  their  de- 
mands had  been  refused  by  the  employing 
corporation.  Today  it  is  the  engineers  and 
firemen  of  half  the  nation  who  make  de- 


56       OPERATIVE  OWNERSHIP 

mands  upon  ninety-eight  railways  com- 
bined. Tomorrow  it  may  be  the  engineers 
and  firemen  of  the  whole  nation,  and  the 
next  day  the  engineers,  firemen,  trainmen, 
switchmen,  shopmen,  and  all  the  other  trade 
and  labor  organizations  in  the  railway  in- 
dustry in  the  United  States.  Whether  the 
interval  between  the  several  steps  above 
mentioned  be  a  day,  a  year  or  five  years,  is 
immaterial  so  far  as  the  principle  involved 
is  concerned.* 

The  successful  working  out  of  the  prin- 
ciple involved,  as  shown  in  the  successes  al- 
ready achieved  through  the  partial  organi- 
zation of  the  railway  and  mining  industries, 
augurs  the  complete  success  of  the  plan  in 
contemplation,  when  the  organization  of 
labor  by  separate  industries  shall  have  be- 
come general.  Consciously  or  unconscious- 
ly to  those  concerned,  the  Syndicalist  plan 

*Since  the  above  lines  were  written  the  engineers,  fire- 
men, conductors,  and  brakemen  engaged  in  the  freight 
service  of  practically  all  the  railways  in  the  country,  and 
numbering,  according  to  newspaper  reports,  about  400,000 
men,  have  made  demands  upon  their  employers  for  an  eight- 
hour  day  at  present  day  wages,  with  time  and  a  half  for 
over  time,  which  demands  the  railways  have  refused.  As 
this  chapter  goes  to  the  printer  a  strike  has  been  called  on 
all  the  railways  to  take  effect  in  a  few  days,  which  the 
President  and  Congress  are  striving  to  avert,  and  which, 
should  they  fail  to  do,  will  mean,  if  long  continued,  the 
stoppage  of  all  important  industries  in  the  country,  throwing 
millions  out  of  employment,  and  will  cause  incalculable  suf- 
fering and  innumerable  deaths  in  large  centers  of  population 
dependent  upon  railway  service  for  their  supplies  of  food 
and  fuel. 


REMEDIES  FOR  INDUSTRIAL  ILLS    57 

is  being  worked  out  by  the  organization  of 
labor  more  and  more  along  the  lines  of 
separate  industries.  When  the  plan  shall 
have  been  perfected  by  the  complete  organi- 
zation of  each  of  the  great  industries  of 
the  country  separately,  the  consummation 
of  the  Syndicalist  plan  of  confederating  the 
several  industrial  unions  into  "One  Big 
Union,"  and,  at  the  opportune  moment,  of 
declaring  the  general  strike  and  of  seizing 
all  the  means  of  industrial  production — the 
railways,  factories,  mines  and  the  like — 
which  is  the  ultimate  aim  of  the  Syndicalist 
Socialists,  would  seem  to  be  but  a  question 
of  organization  and  leadership. 

THE  GOVERNMENT  IN  BUSINESS. 

Among  the  most  powerful  forces  today, 
making  for  the  ultimate  triumph  of  Social- 
ism and  for  the  overthrow  of  the  present 
social  order,  is  the  government  in  business. 
By  this  I  mean  the  control  of  privately 
owned  industry  as  well  as  the  ownership 
and  operation  of  business  enterprises  by 
government  agencies,  whether  national, 
state,  or  municipal.  I  do  not  include  under 
this  latter  head  such  industries  as  are  nec- 
essary to  be  conducted  by  the  government 
in  the  performance  of  its  ordinary  govern- 
mental functions,  as  the  postal  service  in 


58        OPERATIVE  OWNERSHIP 

the  case  of  the  national  government,  and 
water  supply  in  the  case  of  municipal  gov- 
ernment, nor  anything  which  stands  in  a 
subsidiary  relation  to  such  enterprises;  but 
such  as,  until  a  comparatively  recent  pe- 
riod, have  been  regarded  as  within  the 
sphere  of  exclusively  private  enterprise,  and 
free  from  governmental  interference,  ex- 
cept as  to  the  ordinary  regulations  to  pro- 
mote the  health,  safety,  and  good  order  of 
society,  including  the  enforcement  of  jus- 
tice between  individuals,  singly  and  collec- 
tively. 

"Few  people  realize  the  break-neck  speed 
at  which  we  have  been  drifting  into  that 
form  of  Socialism  which  has  to  do  with  gov- 
ernmental control  of  business,"  said  Senator 
John  W.  Weeks,  of  Massachusetts,  in  an  ad- 
dress before  the  Illinois  Manufacturers'  As- 
sociation in  Chicago,  Dec.  8, 1914.  To  many 
persons  who  favor  the  most  stringent  gov- 
ernmental regulation  of  private  industry 
and  yet  consider  their  views  altogether  con- 
sistent with  the  strictest  regard  for  the 
rights  of  property,  the  idea  that  Socialism 
has  anything  whatever  to  do  with  govern- 
mental control  of  business  will  be  rather 
startling.  And  yet,  if  they  will  pause  to 
consider  the  fundamental  principle  of  So- 
cialism as  opposed  to  that  of  individualism, 


REMEDIES  FOR  INDUSTRIAL  ILLS     59 

they  will  readily  perceive  that  Senator 
Weeks  was  right  in  speaking  of  govern- 
mental control  of  business  as  a  form  of  So- 
cialism. 

As  yet  the  application  of  Socialistic  prin- 
ciples in  the  form  of  government-owned  and 
government-operated  industries  has  not 
been  made  in  the  United  States  to  any 
alarming  extent,  although  there  is  a  strong 
and  increasing  popular  demand  for  govern- 
ment ownership  of  certain  classes  of  indus- 
tries. But  in  Europe,  where  Socialism  is 
much  more  firmly  established  than  in  this 
country,  the  socialization  of  industry  has 
been  carried  to  a  far  greater  extent  than  is 
even  imagined  here,  except  among  Social- 
ists. 

In  a  book  published  recently  (1914)  in 
London,  entitled,  The  Collectivist  State  in  the 
Making,  written  by  Emil  Davies,  a  prom- 
inent advocate  of  railway  nationaliza- 
tion, the  author  gives  a  long  list  of  estab- 
lishments embracing  a  wide  variety  of 
kinds  of  businesses,  mostly  in  Europe,  but 
including  a  few  in  other  parts  of  the  world, 
which  have  already  been  socialized  in  the 
sense  that  they  are  owned  and  operated  by 
the  state  or  municipality  for  public  con- 
venience or  profit.  This  list  comprises  up- 
wards of  eighty  kinds  of  businesses,  many; 


60        OPERATIVE  OWNERSHIP 

of  which  may  be  regarded,  in  one  sense  or 
another,  as  public  utilities,  but  much  the 
greater  number  of  which  belong  to  that 
class  of  industries  or  businesses  which,  un- 
til a  comparatively  recent  day,  has  been  re- 
garded as  within  the  field  of  exclusively 
private  enterprise.* 

The  concluding  paragraph  of  the  intro- 
duction to  the  book  above  mentioned  con- 
tains the  following  statement:  "If  Collec- 
tivism is  the  failure  that  many  people  would 
have  us  believe,  it  is  time  some  explanation 
was  forthcoming  to  account  for  its  extra- 
ordinary growth  throughout  the  world/' 

*The  following  are  some  of  the  kinds  of  businesses  men- 
tioned by  Mr.  Davies  as  having  been  already  socialized  in 
different  parts  of  Europe  and  America :  Renting  of  lands ; 
renting  of  dwellings,  stores,  shops,  flats,  etc.;  operation  of 
bridges,  ferries,  tramways,  omnibuses,  cables,  telegraph,  tele- 
phones ;  forests,  timber  and  other  forest  products ;  nurseries 
and  botanical  gardens ;  coal  mines ;  petroleum  oil  wells ;  gold, 
silver  and  diamond  mines;  iron  mines;  iron  works;  salt 
mines;  chalk  pits;  natural  gas;  rubber  plantations;  potash 
works,  producing  various  salts  of  that  metal;  camphor  pro- 
duction ;  opium ;  bread,  flour,  meat,  fish,  and  other  food 
supplies ;  municipal  restaurants ;  wine,  beer,  and  spirits ;  to- 
bacco ;  cigars  and  cigarettes ;  matches ;  gunpowder ;  fish- 
breeding;  ice  factories;  grocery,  meat  and  provision  supply 
stores ;  gas  and  electric  light  and  power  plants ;  brick  works ; 
quarries,  cigar  and  cigarette  factories;  clothing  factories; 
harness  and  saddlery  factories;  woolen  mills;  china  and  por- 
celain manufactories ;  contracting  of  public  works ;  ware- 
houses; grain  elevators;  cold  storage  houses;  slaughter 
houses ;  market  houses ;  baker  shops ;  drug  stores ;  general 
stores;  tourist  bureaux;  baths  and  spas;  hotels  and  board- 
ing houses ;  theatres ;  museums ;  picture  galleries ;  lotteries 
and  book-making ;  banking ;  pawn-shops ;  advertising 
agencies ;  book  publishers ;  life,  fire,  accident,  tornado,  and 
hail  insurance;  funeral  undertaking;  burial  grounds  and 
crematories. 


REMEDIES  FOR  INDUSTRIAL  ILLS     61 

The  same  thought  has  doubtless  occurred 
to  thousands  of  other  well-informed  and 
thoughtful  persons  who  see  with  amaze- 
ment, mingled  with  fear  or  hope  according 
to  the  view  point  from  which  it  is  regarded, 
the  extraordinary  growth  of  collectivism, 
or  Socialism  (to  use  a  more  familiar  and 
synonymous  term). 

The  explanation  lies  in  the  extraordinary 
skill  and  vigor  with  which  the  Socialist 
propaganda  is  carried  on ;  in  the  world- wide 
circulation  of  Socialist  literature  in  every 
form,  ceaselessly  issuing  from  printing 
presses  that  never  stop ;  in  the  appeal  which 
the  Socialist  theories  and  promises  make  to 
the  imagination  of  the  poverty-stricken,  the 
oppressed,  and  the  discontented  among  the 
laboring  classes;  in  the  hatred  engendered 
in  the  working  classes  toward  the  capitalist 
class  by  the  ever-recurring  battles  between 
capital  and  labor  in  what  has  been  called 
"the  war  of  the  classes ;"  and  in  the  success 
with  which  the  Socialist  propagandists  have 
played  upon  the  miseries  of  the  poor  and 
the  oppressed  to  win  their  support  to  a  the- 
ory which,  upon  superficial  view,  seemed  to 
offer  some  hope  of  better  things,  of  which 
elsewhere  there  appeared  to  be  no  hope. 


62        OPERATIVE  OWNERSHIP 

IS  SOCIALISM  DECLINING? 

There  is  a  disposition  observable  in  cer- 
tain quarters  of  late  to  regard  Socialism  as 
having  reached  the  zenith  of  its  influence, 
and  to  have  entered  upon  a  stage  of  retro- 
gression. This  view  is  based  upon  a  cer- 
tain falling  off  in  the  Socialist  vote  in  re- 
cent elections  in  the  more  populous  sections 
of  the  United  States  and  in  certain  portions 
of  Europe. 

No  more  serious  mistake  could  be  made 
in  regard  to  Socialism  than  to  imagine  that 
it  is  in  a  state  of  decline ;  or  that  the  extent 
of  its  influence  is  to  be  gaged  by  the  numer- 
ical strength  of  the  Socialist  vote.  More- 
over, the  falling  off  of  the  vote  in  some  sec- 
tions, which  is  easily  explainable  upon  other 
grounds  than  that  of  retrogression,  was 
coincident  with  a  gain  in  certain  other  sec- 
tions. 

The  strongest  proof  that  not  only  is  So- 
cialism not  declining  in  strength  or  influ- 
ence, but  that  its  influence  has  never  been 
more  widely  felt  than  it  is  now,  is  afforded 
by  the  vast  number  of  laws  enacted  year 
after  year,  extending  in  a  thousand  ways 
the  control  of  government,  national,  state, 
and  municipal,  over  private  property  and 
private  industry.  Such  laws  reflect  the 


REMEDIES  FOR  INDUSTRIAL  ILLS     63 

spirit   of   Socialism,   with   which   society, 
without  realizing  it,  is  fairly  saturated. 

Another  proof  of  the  wide  prevalence  of 
the  Socialist  spirit  may  be  seen  in  the  rap- 
idly growing  demand  for  the  socialization, 
i.  e.,  public  ownership,  of  railways  and  oth- 
er public  utilities.  Many  non-Socialists,  in- 
cluding some  who  are  bitterly  opposed  to 
Socialism,  advocate  the  socialization  of  pub- 
lic utilities,  and  stoutly  maintain  that  pub- 
lic ownership  of  such  utilities  is  not  Social- 
ism. Even  some  Socialists  make  the  same 
claim,  but  in  a  qualified  sense.  Mr.  Morris 
Hillquit,  one  of  the  leading  American  So- 
cialist writers,  states  the  Socialist  position 
in  this  regard  when  he  says  that  Socialists 
of  all  countries  favor  the  municipalization 
or  nationalization  of  public  utilities,  only, 
however,  as  a  measure  to  be  carried  out  by 
an  administration  controlled,  or  strongly 
influenced,  by  the  working  classes.*  Those 
who  are  opposed  to  Socialism,  yet  who  fa- 
vor the  socialization  of  public  utilities, 
should  bethink  themselves  that  Socialism 
means  the  socialization,  or  public  owner- 
ship, of  all  industries,  and  that  every  single 
industry  that  is  socialized,  whether  it  be  a 
"public  utility"  or  not,  is  a  step  towards  the 
fulfillment  of  the  Socialistic  plan. 

^Socialism  in  Theory  and  Practice,  p.  287. 


64        OPERATIVE  OWNERSHIP 

The  total  capital  employed  in  the  railway 
industry  alone  in  1910,  in  the  United  States, 
was  approximately  $18,000,000,000  to  $20,- 
000,000,000  which  amount  was  about  equal 
to  the  capital  employed  in  all  the  manufac- 
turing industries  of  the  country  combined. 
If  to  this  there  be  added  the  capital  em- 
ployed in  all  the  other  public  utilities  it  will 
make  considerably  more  than  half  of  all  the 
capital  employed  in  productive  industry  in 
the  country,  exclusive  of  farms  and  mines. 
If  to  all  this  there  be  added  the  capital  em- 
ployed in  the  coal  mining  industry,  for  the 
socialization  of  which  industry  there  is  a 
strong  favoring  sentiment  throughout  the 
country,  it  will  be  seen  that  nearly  two- 
thirds  of  all  the  industrial  capital  of  the 
country  would  be  socialized. 

SOCIALISM  A  REAL  MENACE. 

With  the  forces  mentioned  in  an  earlier 
part  of  this  chapter  as  explaining  the  ex- 
traordinary growth  of  Collectivism  of 
which  Mr.  Davies  speaks;  with  the  powers 
of  government  steadily  expanding  at  the 
expense  of  individual  rights;  with  the  de- 
mand growing  daily  more  wide-spread  and 
stronger  for  the  socialization  of  public  utili- 
ties and  mines,  and  the  tremendous  power 
which  the  socialization  of  these  industries 


REMEDIES  FOR  INDUSTRIAL  ILLS     65 

involves,  in  view  of  the  fact,  as  above 
shown,  that  they  represent  much  the  greater 
part  of  all  the  industrial  wealth  of  the  na- 
tion; with  the  certainty  that  this  power, 
when  gained,  would  be  used  as  a  lever  to 
overthrow  the  existing  social  order,  and 
"seize  the  whole  power  of  government  in 
order  that  they  may  thereby  lay  hold  of 
the  whole  system  of  socialized  industry"; 
it  will  be  seen  that  the  menace  of  Socialism 
is  no  idle  dream — no  mere  bogey  designed 
to  scare  timid  capitalists  into  the  adoption 
of  measures  of  social  justice;  but  a  very 
real  and  imminent  peril  which  it  behooves 
all  who  hold  in  respect  the  principles  upon 
which  rest  the  prevailing  social,  political, 
and  religious  systems  of  civilized  society  to 
take  measures  to  avert  while  yet  they  may. 
If,  then,  the  existing  social  order  is  to 
be  perpetuated ;  if  labor  is  to  be  made  free 
and  the  rights  of  property  secure;  if  the 
theory  of  the  relations  which  should  subsist 
between  the  individual  and  the  government, 
as  expressed  in  the  American  Declaration 
of  Independence  is  to  be  vindicated,  (which 
theory  involves,  as  we  have  seen,  the  prin- 
ciple of  government  as  the  protector,  but 
not  the  source,  of  individual  rights) ;  if  the 
rights  of  individuals,  singly  or  in  group,  to 
acquire,  enjoy  and  dispose  of  their  prop- 


66        OPERATIVE  OWNERSHIP 

erty,  free  from  unnecessary  governmental 
control  or  interference,  as  contemplated  by 
the  founders  of  the  government,  Is  to  be 
restored — for  it  no  longer  exists  in  its  en- 
tirety— Socialism  must  be  eliminated;  and 
the  activities  of  government  must  be  re- 
stricted to  the  business  of  governing,  ind 
such  related  activities  as  the  necessities  of 
government,  liberally  construed,  but  with 
due  regard  to  individual  rights,  shall  re- 
quire. 

CO-OPERATION. 

The  term  "Co-operation,"  in  the  broad 
sense  in  which  it  is  sometimes  used  by 
writers  on  political  economy,  embraces  al- 
most every  form  of  commercial,  agricul- 
tural, and  industrial  activity  in  which  indi- 
viduals, or  groups  of  individuals,  associate 
for  the  production,  purchase,  distribution 
or  sale  of  commodities.  For  the  purposes 
of  the  present  work,  we  are  concerned 
chiefly  with  that  form  of  co-operation  which 
has  to  do  with  the  relations  of  capital  and 
labor  employed  in  the  production  of  com- 
modities, and  which  has  received  the  name 
of  Productive  Co-operation. 

Productive  co-operation  is  exemplified  in 
a  variety  of  forms  which,  in  the  main,  may 
be  classified  under  three  heads  as  follows: 


REMEDIES  FOR  INDUSTRIAL  ILLS     67 

(1)  Establishments  in  the  ownership  of 
which  the  workers  have  no  part,  nor  any 
voice  in  the  management,  but  receive  in 
addition  to  their  regular  wages,  a  definite 
proportion  of  the  profits  of  the  establish- 
ment.   This  form  of  co-operation  is  com- 
monly designated  as  Profit-Sharing. 

(2)  Establishments  in  which  the  work- 
ers are  the  owners  of  a  substantial  share 
of  the  capital  with  which  the  productive 
operations  are  carried  on,  and  have  in  vir- 
tue of  such  ownership,  a  voice  in  the  man- 
agement, and  receive  in  addition  to  the 
standard  rate  of  wages  a  share  in  the  prof- 
its proportionate  to  the  amount  of  their 
wages,  and  a  certain  other  share  as  the 
earnings  of  their  capital;  the  remaining 
portion  of  the  capital  being  owned  by  non- 
working  share-holders.    This  form  of  co- 
operation is  commonly  designated  as  Labor 
Copartnership. 

(3)  Those  in  which  the  workers  ex- 
clusively own  the  capital,  carry  on  their 
operations  under  the  direction  of  managers 
of  their  own  selection,  and  distribute  the 
profits  among  themselves  on  an  equitable 
and  mutually  acceptable  basis.    This  also 
is  called  Labor  Co-partnership,  which  name, 
however,  as  applied  to  this  class,  would  seem 
to  be  rather  unhappily  chosen,  since  it  fails 


68        OPERATIVE  OWNERSHIP 

to  indicate  any  distinction  between  this  and 
the  class  above  described,  in  which  some  of 
the  profits  go  to  non-working  capitalists. 
To  indicate  the  status  of  such  a  group  as 
the  last  above  mentioned  the  name  of  Oper- 
ative Ownership  would  seem  a  much  more 
appropriate  appellation,  as  will  be  shown  in 
a  later  chapter.* 

PROFIT-SHARING  AND  LABOR  COPARTNERSHIP. 

Under  the  name  of  Profit-Sharing  as 
above  defined  there  is  embraced  a  wide  va- 
riety of  co-operative  schemes.  In  most  of 
these  the  capitalist,  with  a  view  to  evoking 
a  higher  degree  of  efficiency  in  his  em- 
ployees, allows  them  to  participate  in  the 
profits  to  a  very  limited  extent,  so  that  the 
increased  efficiency  of  the  operatives,  aris- 
ing from  the  hope  of  greater  reward,  will 
not  only  produce  all  that  they  receive  as 
their  share  in  the  profits,  but  will  also  yield 
to  the  capitalist  a  larger  profit  than  he 
would  otherwise  realize.  Such  arrange- 
ments, besides  obviating  much  of  the  fric- 
tion incident  to  the  ordinary  wage  system, 
form  a  cheap  sort  of  insurance  against 
strikes,  by  attaching  to  the  privilege  of  par- 
ticipation the  condition  that  the  employees 
shall  take  no  part  in  any  strikes;  and  in 

*See  Chapter  III.  infra. 


REMEDIES  FOR  INDUSTRIAL  ILLS     69 

some  cases,  that  they  shall  not  be  members 
of  a  labor  union. 

Not  all  profit-sharing  establishments, 
however,  are  actuated  by  the  motives  of 
those  referred  to  in  the  preceding  para- 
graph. Some,  though  unfortunately  a 
small  minority,  give  their  employees  a  very 
substantial  share  in  the  profits  in  addition 
to  the  standard  rate  of  wages,  without  im- 
posing any  restrictions  upon  the  employees 
in  regard  to  membership  in  labor  unions, 
and  some  even  encourage  such  membership. 
But  the  workers  are  given  no  voice  in  the 
management,  and  no  hope  is  held  out  to 
them  that  they  can  ever  acquire  any  inter- 
est in  the  establishment,  or  be  anything  but 
employees  though  they  work  a  lifetime  in  it. 

The  third  class  of  co-operative  schemes 
mentioned  in  the  foregoing  classification, 
that  in  which  the  workers  collectively  are 
the  sole  owners  of  the  establishment  in 
which  they  carry  on  their  operations,  is 
exemplified  in  a  multiplicity  of  concerns 
which  were  started  in  a  small  way  by  the 
workers,  with  capital  contributed  by  them- 
selves, many  of  which  have  grown  to  very 
respectable  proportions.  This  class  also 
comprises  many  large  concerns  which,  or- 
iginally established  and  conducted  on  capi- 
talistic lines,  were  afterwards  changed  into 


70        OPERATIVE  OWNERSHIP 

copartnership  establishments  in  the  man- 
ner described  in  the  preceding  paragraph, 
and  finally  evolved  into  complete  operative- 
owned  establishments  when  the  original 
capitalist  owners,  having  acquired  a  suffi- 
cient store  of  wealth  to  satisfy  their  de- 
sires in  that  regard,  and  being  desirous  of 
further  rewarding  those  by  whose  skill  and 
labor,  first  as  employees  and  later  as  part- 
ners, their  wealth  was  produced,  trans- 
ferred to  the  workers  or  operatives  their 
remaining  interests  in  the  establishments, 
to  be  paid  for  out  of  the  future  profits. 

A  brief  description  of  one  or  two  estab- 
lishments which  exemplify  the  form  of 
labor  copartnership  under  discussion, 
which  in  their  main  features  have  served 
as  models  for  many  others,  and  which  are 
frequently  mentioned  in  the  writings  of 
economists,  will  serve  to  illustrate  the  prin- 
ciple of  labor  co-partnership,  and  the  man- 
ner in  which  it  was  applied,  better,  perhaps, 
than  any  description  in  general  terms  which 
I  could  giv6. 

THE  MAISON   LECLAIRE. 

Probably  the  first  establishment  to  ex- 
emplify the  principle  of  labor  co-partner- 
ship on  a  scale  and  in  a  manner  to  attract 
attention  was  that  known  as  the  Maison 


REMEDIES  FOR  INDUSTRIAL  ILLS     71 

Leclaire.  This  establishment  was  founded 
by  Edme  Jean  Leclaire,  a  contractor  of 
house-painting,  of  Paris,  in  1827.  In  1838 
he  induced  his  permanent  workmen  to  form 
a  Mutual  Benefit  Society  to  provide  for 
mutual  help  in  time  of  sickness,  and  this 
society  became  the  nucleus  of  the  co-opera- 
tive scheme  which  he  afterwards  estab- 
lished. 

In  1842,  recognizing  that  by  greater  dili- 
gence and  care  of  tools  and  materials  his 
employees  could  largely  increase  the  prof- 
its of  his  business,  he  introduced  a  system 
of  profit  sharing  with  a  view  to  furnishing 
them  with  an  incentive  for  the  exercise  of 
these  virtues,  as  well  as  to  make  provision 
for  their  old  age.  "I  saw,"  said  Leclaire, 
"that  it  paid  me  better  to  make  more  and 
to  give  an  interest  in  the  profits  to  my 
workers  who  helped  me,  than  to  make  less 
and  give  them  no  such  interest."  John 
Stuart  Mill,  in  his  Principles  of  Political 
Economy*  speaking  of  M.  Leclaire's  rela- 
tions with  his  employees  at  this  period 
says:  "He  assigns  to  himself,  besides  in- 
terest for  his  capital,  a  fixed  allowance  for 
his  labor  and  responsibility  as  manager. 
At  the  end  of  the  year  the  surplus  profits 
are  divided  among  the  body  of  employees, 

*Book  IV,  Ch.  VIII,  Sec.  5. 


72        OPERATIVE  OWNERSHIP 

himself  included,  in  the  proportion  of  their 
salaries." 

Under  the  profit-sharing  system  the  hours 
of  labor  of  the  employees  were  reduced; 
the  ordinary  wages  were  maintained  at  the 
highest  rate  paid  for  the  same  class  of  labor 
anywhere  in  the  city,  to  which  wages  the 
workers'  share  of  the  profits  formed  a  sub- 
stantial addition.  The  business  increased 
greatly  under  the  new  system,  and  the  prof- 
its of  the  owner  increased  correspondingly. 

In  1863  the  Mutual  Benefit  Society  was 
incorporated  and  was  made  a  partner  in 
the  business,  and  in  1869  the  business  itself 
was  incorporated,  with  a  capital  of  $60,- 
000  of  which  M.  Leclaire  held  $20,000.  For 
the  future  government  of  the  society  M. 
Leclaire  prepared  and  put  in  force  an  in- 
strument in  the  nature  of  a  constitution, 
which  he  called  the  "Charter  of  Labor," 
which  prescribed  minutely  and  at  length 
the  details  for  the  management  of  the  estab- 
lishment. M.  Leclaire  soon  after  withdrew 
his  share  of  the  capital  and  retired  from 
Paris  to  a  country  place  where  he  soon  after 
died,  leaving  a  fortune  of  over  1,200,000 
francs  as  the  result  of  his  success,  which 
he  attributed  to  the  scheme  of  labor  co- 
partnership. 

The  house  of  Leclaire  (now  known  as 


REMEDIES  FOR  INDUSTRIAL  ILLS     73 

Brugniot,  Cros,  et  Cie,)  is  still  in  a  pros- 
perous condition,  having  increased  its  capi- 
tal to  more  than  double  what  it  was  when 
M.  Leclaire  withdrew  from  the  concern. 
The  capital  is  held,  pursuant  to  the  "Char- 
ter of  Labor,"  five-eighths  by  the  Mutual 
Aid  Society,  and  three-eighths  by  the  Man- 
aging Partners,  of  which  there  are  two. 
These  are  elected  for  life  by  a  chosen  body 
of  workers,  but  may  withdraw  at  will  or 
may  be  removed  for  certain  reasons  and  in 
a  certain  manner  prescribed  by  the  char- 
ter. The  capital  receives  5  per  cent,  inter- 
est and  the  net  profits  after  that  are  ap- 
portioned as  follows:  50  per  cent,  payable 
in  cash  to  the  workers,  of  all  classes,  in 
proportion  to  wages;  35  per  cent,  to  the 
Mutual  Benefit  Society;  and  15  per  cent,  to 
the  Managing  Partners,  who,  in  addition  to 
their  share  in  the  profits  and  interest  on 
their  capital,  receive  a  salary  of  $1,200  a 
year. 

THE  FAMILISTERE  SOCIETY  OF  GUISE. 

One  of  the  most  widely  known  of  all  the 
establishments  in  which  the  principle  of 
Labor  Co-partnership  is  exemplified  is  that 
known  as  the  Familistere  Society  of  Guise. 
This  establishment  was  founded  by  M.  Jean- 
Baptiste  Andre  Godin  for  the  manufacture 


74        OPERATIVE  OWNERSHIP 

of  stoves  and  other  iron  utensils  of  house- 
hold use.  From  a  small  beginning  the  busi- 
ness under  the  management  of  M.  Godin 
grew  rapidly  to  Jarge  proportions. 

From  an  early  period  in  the  career  of  M. 
Godin  as  a  manufacturer  he  seems  to  have 
contemplated  the  development  of  his  estab- 
lishment, with  regard  to  its  relations  with 
its  workers,  along  communistic  lines,  mod- 
eled after  the  systems  elaborated  by  M. 
Fourier,  with  communal  workshops,  com- 
munal dwellings,  communal  stores,  etc.  In 
furtherance  of  this  idea  M.  Godin,  in  1859, 
commenced  the  erection  of  the  familistere 
or  communal  apartment  house  for  his  em- 
ployees, building  one  part  at  a  time,  and 
gradually  developing  a  system  of  communal 
dwellings,  stores,  schools,  parks,  boule- 
vards, bath  houses,  theatre,  restaurant, 
and  in  short,  all  the  necessaries  of  a  self- 
contained  community. 

For  the  purposes  of  this  examination  we 
are,  however,  concerned  chiefly  or  wholly 
with  the  industrial  phase  of  M.  Godin's 
enterprise,  for  in  that  respect,  and  that 
only,  it  has  served  as  a  model,  in  some  of 
its  most  important  features,  for  many  other 
co-operative  establishments  in  which  the 
principle  of  labor  copartnership  has  been 
applied 


REMEDIES  FOR  INDUSTRIAL  ILLS     75 

In  1880,  having  some  years  previously 
introduced  the  principle  of  profit-sharing 
in  his  establishment,  M.  Godin  organized, 
in  legal  form,  the  society,  composed  of  him- 
self and  his  workmen,  to  which  he  gave  the 
name  of  the  "Familistere  Society  of  Guise." 

A  constitution,  the  result  of  long  and 
careful  deliberation  by  M.  Godin,  was 
drawn  by  him,  and  formally  adopted  at  a 
meeting  of  the  workmen  held  for  that  pur- 
pose. This  instrument  provided  for  the 
organization  and  future  regulation  of  the 
affairs  of  the  society  in  minute  detail. 

M.  Godin,  at  the  time  of  the  organization 
of  this  society,  transferred  to  it  his  entire 
establishment,  at  a  valuation  of  4,600,000 
francs  ($887,800),  the  fairness  of  which 
valuation  has  never  been  questioned.  He 
received  in  exchange  "founder's  certifi- 
cates" to  the  full  value  of  the  establishment. 
These  certificates  constituted  the  provision- 
al capital  stock  of  the  society.  They  bore 
interest  at  the  rate  of  5%,  in  addition  to 
which  the  holder  participated  in  the  net 
profits  of  the  establishment  in  common  with 
the  workers,  on  the  theory  that  where  capi- 
tal was  employed  in  industrial  production, 
it  was  entitled  to  wages  the  same  as  labor — 
the  wages  of  capital  being  the"  interest — and 
that  both  should  participate  in  the  net  prof- 


76        OPERATIVE  OWNERSHIP 

its  in  proportion  to  their  wages  without 
distinction  between  wages  of  labor  and 
wages  of  capital. 

It  was  provided  in  the  constitution  that 
the  share  of  the  profits  payable  to  the 
workers,  in  addition  to  the  standard  rate 
of  wages,  should  all  be  applied  to  the  pur- 
chase of  founder's  certificates,  which  was 
done,  and  new  certificates,  which  were 
called  "savings  certificates"  were  issued  in 
like  amounts,  and  distributed  to  the  workers 
according  to  the  share  of  the  profits  which 
each  was  entitled  to  receive.  The  savings 
certificates  were  to  receive  the  same  rate 
of  interest  and  the  same  share  in  the  prof- 
its as  the  founder's  certificates.  When  all 
the  founder's  certificates  had  been  taken  up 
and  paid  for  with  the  savings  of  the  work- 
ers, the  latter  became  the  sole  and  absolute 
owners  of  the  establishment.  This  point 
was  reached  in  1894*  The  establishment, 
in  all  its  branches,  was  still  in  successful 
operation  at  the  beginning  of  the  great  Eu- 
ropean war,  but  it  has  since  been  reported 
as  utterly  destroyed  in  that  catastrophe. 

The  co-operative  schemes  of  Godin  and 
Leclaire,  while  differing  widely  in  many  im- 

*Industrial  Communities,  by  W.  F.  Willoughby,  in  Bulletin 
of  the  Department  of  Labor,  September  1896;  Co-partnership 
in  Industry,  by  C.  R.  Fay,  pp.  37-58;  Co-partnership  and 
Profit-Sharing,  by  Aneurin  Williams,  pp.  116-136. 


REMEDIES  FOR  INDUSTRIAL  ILLS     77 

portant  matters  of  detail,  possess  many 
fundamental  features  in  common.  Both 
h5ave  exemplified  the  principle  of  Labor  Co- 
partnership in  the  successive  stages  of 
profit-sharing,  part-ownership  and  com- 
plete ownership,  of  the  means  of  produc- 
tion by  those  who  work,  with  hand  or  brain, 
in  productive  operations ;  and  both  exempli- 
fy a  certain  trend  of  industrial  development 
from  profit-sharing  to  co-partnership 
(using  the  former  term  in  a  true  sense,  and 
not  as  a  scheme  of  anti-strike,  anti-trade- 
union  insurance),  and  from  copartnership 
to  complete  ownership  by  the  workers. 

SLOW   PROGRESS   OF   CO-OPERATION. 

But  the  adoption  of  the  principle  of  co- 
operation in  the  forms  exemplified  by  Godin 
and  Leclaire  depends  wholly  upon  the  will 
of  each  individual  employer,  as  affected  by 
his  benevolent  disposition  and  his  sense  of 
justice,  or  the  lack  of  these  virtues;  and 
while  many  employers  possess  them  abun- 
dantly, such  employers  are,  relatively  to  the 
total  number  of  employers,  insignificantly 
few.  While  this  condition  continues  in  in- 
dustrial relations,  the  progress  of  the  form 
of  co-operation  involving  the  principle  thus 
exemplified  must  necessarily  be  slow. 

Nearly  a  hundred  years  have  elapsed 


78        OPERATIVE  OWNERSHIP 

since  Robert  Owen  first  advocated  the  prin- 
ciple of  co-operation  between  capitalist  and 
laborer  on  a  basis  that  would  secure  to  the 
latter  a  more  equitable  share  of  the  produce 
of  his  labor.  Philanthropists,  political  econ- 
omists, sociologists,  in  every  generation 
from  that  time  to  the  present,  have  written 
and  spoken  in  advocacy  of  the  same  prin- 
ciple; yet  the  number  of  establishments  in 
.which  any  approach  to  a  just  distribution 
of  the  produce  of  labor,  as  between  work- 
ers and  capitalists,  is  made,  may  be 
reckoned  in  scores,  where  those  in  which 
the  capitalistic  principle  of  the  most  work 
for  the  least  money  is  applied  may  be 
reckoned  in  tens  of  thousands. 

Nor  is  there  any  reason  to  hope  that  that 
form  of  co-operation  in  which  the  workers 
not  only  have  a  direct  interest  in  the  prof- 
its of  their  own  work,  but  are  also  the 
owners,  in  whole  or  in  part,  of  the  capital 
with  which  it  is  carried  on,  as  exemplified 
in  the  systems  of  Godin,  Leclaire  and  many 
others  who  have  followed  their  example  in 
principle  if  not  in  detail,  will  ever  become 
general  so  long  as  its  adoption  depends  upon 
the  voluntary  act  of  each  individual  em- 
ployer of  labor. 


REMEDIES  FOR  INDUSTRIAL  ILLS     79 

WHAT  CO-OPERATION  LACKS. 

Undoubtedly  the  schemes  inaugurated  by 
Godin,  Leclaire,  and  their  followers  embody 
the  principle  wherein  lies  the  ultimate  solu- 
tion of  the  labor  problem  through  the 
ownership  and  management  by  the  workers 
of  the  means  of  industrial  production.  But 
there  is  lacking  in  the  various  schemes 
above  described  for  the  solution  of  that 
problem,  something  vitally  essential  to 
their  efficacy,  and  which  must  be  supplied 
before  the  principle  in  question  will  ever 
be  adopted  on  a  scale  sufficiently  broad  to 
affect,  to  any  appreciable  extent,  the  status 
of  the  laboring  classes  in  general.  The 
thing  that  is  lacking  is  a  means  whereby 
the  adoption  of  the  principle  of  joint  par- 
ticipation in  management  and  profits,  and 
joint  ownership,  by  capital  and  labor,  may 
be  made,  by  law,  obligatory  upon  indus- 
trial capitalists  in  general,  while  scrupu- 
lously respecting  their  legal  and  ethical 
rights  of  property.  Under  the  operation  of 
such  a  system  all  capitalists  would  have  to 
conform  to  the  requirements  of  social  jus- 
tice in  dealing  with  their  workers,  where 
now  it  is  left  to  their  own  free  wills  to  do 
so  or  not,  and  only  a  comparatively  few 
conform  to  those  requirements. 


80        OPERATIVE  OWNERSHIP 

TRADE  UNIONISM. 

The  most  successful  and,  as  judged  by  its 
achievements,  the  most  practical  agency 
for  the  betterment  of  the  condition  of  the 
laboring  classes,  which  has  hitherto  been 
proposed  or  put  into  operation,  is  that  of 
Trade  Unionism.  Not  all  other  agencies 
combined  have  accomplished  a  tithe  as 
much  in  that  regard  as  has  this  single 
agency. 

It  is  chiefly  through  Trade  Unionism  that 
working  hours  in  industrial  establishments 
have  been  reduced  from  fourteen,  and  in 
some  cases  sixteen,  a  day  to  ten,  nine  or 
eight;  that  conditions  of  labor  with  regard 
to  health  and  safety  from  accidents  have 
been  vastly  improved;  that  liability  for  ac- 
cidents incident  to  the  employees'  work  has 
been  placed  by  law  upon  the  employer;  that 
regulations  governing  the  employment  and 
conditions  of  labor  of  women  and  children, 
with  a  view  to  conserving  their  health  and 
safety,  and  scores  of  other  regulations  for 
the  benefit  of  the  laboring  classes  have  been 
established  by  law.  It  is  chiefly  through 
unionism  that  wages  have  been  increased 
by  from  one  hundred  to  two  hundred  per 
cent  or  more  in  little  more  than  a  single 
generation — a  gain,  however,  which  is  abso- 
lute rather  than  relative;  and  which  is 


REMEDIES  FOR  INDUSTRIAL  ILLS     81 

largely,  if  not  wholly,  offset  by  the  in- 
creased cost  of  living;  but  without  which 
the  situation  of  the  laboring  classes  would 
be  deplorable  indeed. 

Trade  unionism  found  the  laboring  man 
prone  upon  the  earth  at  the  feet  of  his  capi- 
talist master,  with  the  master's  foot  upon 
his  neck.  It  has  raised  him  to  an  upright 
posture,  head  erect,  and  level  with  that  of 
his  master.  It  found  him  a  cringing,  fawn- 
ing, suppliant  thing.  It  has  imbued  him 
with  a  sense  of  the  dignity  of  manhood  and 
of  the  rights  of  labor.  It  found  him  with- 
out the  spirit  to  look  his  master  in  the  face 
and  ask  for  what  was  his  due — a  just  share 
of  the  wealth  which  he  produced.  It  has  in- 
spired him  with  a  sense  of  his  deserts,  and 
with  the  spirit  to  stand  face  to  face  and  eye 
to  eye  with  that  master  and  to  demand  his 
rights — nor  need  he  bow  the  head  nor 
drop  the  eye  in  making  his  demand.  It 
found  him  with  the  spirit  of  a  slave,  and  it 
put  into  him  the  soul  of  a  man! 

We  saw  in  the  last  preceding  chapter 
that  organized  labor  carries  on  cease- 
less warfare  with  capital  for  the  rights  of 
labor.  But  its  activities  have  been  by  no 
means  confined  to  struggles  between  em- 
ployer and  employee.  A  very  large  part 
of  its  achievements  have  been  won  through 


82        OPERATIVE  OWNERSHIP 

the  medium  of  public  opinion,  to  the  forma- 
tion of  which  the  energies  of  organized  labor 
are  steadily  and  intelligently  directed.  To 
this  influence,  in  large  measure,  and  in  part 
also  to  the  influence  of  organized  labor 
operating  directly  upon  legislative  bodies, 
is  due  the  enactment  of  that  large  body  of 
laws,  so  beneficial  to  the  laboring  classes, 
which  are  usually  referred  to  by  the  general 
title  of  Labor  Legislation. 

By  means  of  legislation  brought  about  in 
this  manner  labor  has  won  in  innumerable 
instances,  rights  and  benefits  for  which  it 
had  striven  long  and  vainly  by  direct  nego- 
tiation with  capitalist  employers,  and  which 
rights,  had  they  not  been  won  by  legisla- 
tion, would,  doubtless,  have  been  the  subject 
of  many  a  bitter  struggle  between  capital 
and  labor,  with  the  usual  incidents  of  class 
hatred  and  economic  loss  which  invariably 
attend  such  struggles,  when  waged  by 
means  of  the  strike  or  the  lockout,  the  boy- 
cott or  the  blacklist. 

TRADE  AGREEMENTS. 

The  highest  achievement  of  organized 
labor  is  the  trade  agreement.  Under  this 
system  the  principle  of  collective  bargain- 
ing, for  which  organized  labor  has  fought 
so  strenuously  and  persistently  from  the  be- 


REMEDIES  FOR  INDUSTRIAL  ILLS     83 

ginning,  is  recognized  to  the  full.  The  capi- 
talist, or  association  of  capitalists,  by  its 
representatives,  confers  directly  with  the 
representatives  of  the  labor  union,  and  an 
agreement  is  entered  into  fixing  the  wages, 
hours  and  conditions  of  work  during  the 
life  of  the  agreement,  and  providing  a 
method  for  the  peaceful  settlement  of  any 
disputes  which  may  arise  under  the  agree- 
ment or  in  relation  to  the  matters  embraced 
therein. 

In  general  trade  agreements  'are  entered 
into,  not  between  a  single  establishment 
and  its  employees,  but  between  an  associa- 
tion of  all  or  a  number  of  establishments  in 
a  given  industry  and  in  a  given  locality,  on 
the  one  side,  and  the  unions  representing 
all  the  employees  of  those  establishments, 
on  the  other,  and  cover  not  only  the  rate 
of  wages  and  certain  details  of  manage- 
ment— such  for  instance  as  the  employment 
and  discharge  of  workers,  the  number  of 
apprentices,  and  the  like,  but  in  some  cases 
the  prices  at  which  the  product  shall  be 
sold. 

The  system  of  trade  agreements,  notwith- 
standing that  it  marks  a  distinct  improve- 
ment in  the  relations  between  capital  and 
labor,  is  not  to  be  understood  as  an  ideal 
scheme  for  the  unification  of  the  in- 


84        OPERATIVE  OWNERSHIP 

terests  of  capital  and  labor.  It  is  merely  a 
method  of  peaceful  settlement  for  a  limited 
period  of  time,  of  questions  upon  which  the 
opposing  interests  of  employers  and  em- 
ployees predispose  them  to  disagree ;  a  sys- 
tem in  which  the  representatives  of  the  op- 
posing interests  meet  in  joint  conference, 
bluff  and  wrangle,  each  side  striving  to  gain 
an  advantage  over  the  other,  and  finally 
compromise,  rather  than  resort  to  the 
strike,  the  boycott,  or  other  form  of  indus- 
trial warfare.* 

Trade  agreements  were  known  in  Eng- 
land as  early  as  1860,  and  the  system  is  said 
to  be  highly  developed  in  that  country.  In 
the  United  States  it  has  been  less  kindly  re- 
ceived by  the  capitalist  class,  although  of 
late  years  the  system  has  been  more  freely 
adopted  than  formerly.  It  is  still,  however, 
confined  to  a  comparatively  small  number 
of  industries  and  localities.  It  has  not 
eliminated  strikes,  although  its  tendency  is 
to  lessen  the  frequency  of  their  occurrence. 
Wherever  the  system  of  trade  agreements 
has  been  adopted  it  has  been  a  distinct  tri- 
umph for  the  principles  of  unionism. 

"It  has  often  been  said  of  late,"  writes 
President  Emeritus  Charles  W.  Eliot,  of 


^History  and  Problems  of  Organised  Labor,  by  Frank 
Tracy  Carlton,  pp.  243-245. 


REMEDIES  FOR  INDUSTRIAL  ILLS     85 

Harvard  University,  "that  the  joint  agree- 
ment is  the  real  goal  of  unionism."* 

THE  TRUE  GOAL  OF  TRADE  UNIONISM. 

The  question  as  to  what  will  be  the  future 
of  unionism  is  one  concerning  which  there 
is  much  speculation  among  publicists  and 
sociologists  at  the  present  time.  That  with 
the  general  adoption  of  the  system  of  trade 
agreements,  the  goal  of  unionism  will  have 
been  gained  is  the  belief  of  many,  as  indi- 
cated by  the  words  above  quoted  from 
Doctor  Eliot.  If  this  be  true,  the  attain- 
ment of  the  goal  would  leave  nothing  more 
to  be  achieved,  so  far  as  the  demands  of 
labor  were  concerned,  and  the  principal  ob- 
ject of  unionism  thereafter  would  only  be 
to  support  the  claims  of  labor  in  the  joint 
conferences  between  the  representatives  of 
capital  and  labor  respectively;  and,  if  nec- 
essary, to  enforce  the  demands  of  labor  by 
means  of  the  strike,  in  the  event  that  the 
conferees  should  fail  to  effect  a  mutually 
satisfactory  agreement. 

The  better  opinion,  as  it  seems  to  me,  is, 
not  that  organized  labor  has  any  specific 
reform  or  achievement  in  contemplation  to 
which  its  efforts  are  consciously  directed  as 

*The  Future  of  Trades-Unionism  and  Capitalism  in  a 
Democracy,  p.  32. 


86        OPERATIVE  OWNERSHIP 

a  goal;  but  that  it  exists  for  the  advance- 
ment of  the  interests  of  the  laboring  classes 
by  the  advocacy  of  any  measure  which,  from 
time  to  time  shall  seem  beneficial;  for  the 
resistance  of  any  measures  which  may  seem 
injurious  to  those  rights  and  interests ;  and 
to  meet  and  deal  with  any  exigencies,  in- 
dustrial or  political,  affecting  the  laboring 
classes,  as  such  exigencies  may  arise. 

But  if  Trade  Unionism  is  to  be  the  instru- 
ment through  which  the  higher  and  ultimate 
destiny  of  the  laboring  classes  is  to  be 
worked  out — a  state  in  which  they  shall 
have  no  employers  with  whom  to  wrangle 
about  wages,  and  no  trade  agreements  to 
make  or  to  enforce,  but  in  which  the  work- 
ers shall  be  their  own  capitalists,  owning 
collectively  the  capital  with  which  they  car- 
ry on  their  productive  operations — it  must 
do  something  more  than  maintain  its  or- 
ganization for  the  purpose  of  carrying  on 
a  campaign  for  higher  wages  and  better 
conditions  of  work ;  and  must  do  more  than 
safeguard  the  rights  and  interests  of  labor 
in  any  industrial  or  political  developments 
which  may  affect  those  rights  and  interests. 
It  must  adopt  and  pursue  some  definite  plan 
tending  to  bring  about  and  hasten  the  reali- 
zation of  that  destiny. 

For  it  is  not  to  be  supposed  that  so  pow- 


REMEDIES  FOR  INDUSTRIAL  ILLS     87 

erful  an  organization  of  the  laboring 
classes  as  we  have  in  America  today  would 
be  content  with  the  system  of  trade  agree- 
ments, or  with  any  other  arrangement  of 
industrial  affairs  which  contemplated  as  a 
permanent  institution  the  relation  of  mas- 
ter and  servant,  or — to  use  a  less  harshly 
sounding  term  meaning  the  same  thing — 
employer  and  employee,  without  striving 
for  the  greater  moral  and  material  benefits, 
and  the  greater  industrial  freedom  involved 
in  some  form  of  partial  or  complete  owner- 
ship by  the  workers,  of  the  means  of  indus- 
trial production.  The  system  of  trade 
agreements,  which  Doctor  Eliot  regards  as 
the  highest  achievement  and  the  goal  of 
organized  labor,  however  great  may  be  its 
advantages  as  compared  with  the  system  at 
present  generally  prevailing  in  industrial 
relations,  involves  the  continuation  of  the 
relation  of  master  and  servant  in  the  field 
of  industrial  production.  As  a  permanent 
system  it  would  mean  the  establishment  of 
a  serving  class  and  a  master,  or  ruling,  class, 
somewhat  resembling  the  plebeian  and  the 
patrician  classes  of  ancient  Rome.  How- 
ever well  the  trade  agreement  system  might 
serve  to  mollify  the  feelings  and  increase 
the  wages  of  the  laboring  classes,  there 
would  still  remain,  among  its  inseparable 


88        OPERATIVE  OWNERSHIP 

attributes,  two  of  the  most  odious  features 
of  capitalism,  namely:  the  working  class 
would  still  be  the  hired  men  and  hired  wom- 
en of  the  master  class;  and  the  master  class 
would  still  live,  not  by  its  own  labor,  but 
by  appropriating  the  product  of  the  work- 
ers' labor,  by  right  of  the  mere  ownership 
of  the  tools  with  which  the  latter  work. 

There  is  inborn  in  every  human  breast 
an  instinctive  desire  for  liberty.  After 
numberless  ages  of  development  this  desire, 
in  so  far  as  it  related  to  political  conditions, 
found  expression  in  various  portions  of  the 
earth  and  at  various  times,  in  the  demand 
for  civil  and  political  independence.  It  has 
been  realized  in  part  in  several  modern 
states  whose  peoples  are  politically  self- 
governing.  But  the  principle  of  industrial 
liberty  has  not  developed  as  rapidly  as  has 
the  principle  of  political  liberty,  and  side  by 
side  with  political  freedom  there  exists  in- 
dustrial bondage. 

With  the  attainment  of  the  working 
classes  to  higher  standards  of  education, 
and  the  growth  among  them  of  the  habit 
of  general  reading  which  the  last  genera- 
tion has  witnessed,  they  have  gained  a 
higher  conception  of  the  dignity  and  the 
rights  of  labor.  The  spirit  of  industrial 
liberty  is  moving  among  them,  and  they  are 


REMEDIES  FOR  INDUSTRIAL  ILLS     89 

beginning  to  demand  some  measure  of  self- 
government  in  industrial  affairs.  The  day 
is  coming,  and  I  believe  it  is  near  at  hand, 
when  the  laboring  classes  will  demand  not 
only  their  full  equitable  share  of  the  prod- 
ucts of  their  toil,  but  an  equal  voice  with 
their  capitalist  associates  in  the  manage- 
ment of  the  establishments  in  which  the 
labor  of  the  laborers  and  the  capital  of  the 
capitalists  are  jointly  employed,  and  the 
right  to  acquire,  at  a  fair  price,  and  own,  a 
substantial  interest  in  the  establishments  in 
which  they  work.  For  they  will  not  always 
be  content  to  be  mere  wage  earners,  depen- 
dent upon  the  will  of  a  master  for  the  op- 
portunity to  earn  a  living. 

Whoever,  therefore,  would  set  a  goal  for 
the  achievement  of  organized  labor,  or  set 
a  limit  to  the  aspirations  of  the  laboring 
classes,  short  of  the  absolute  industrial  in- 
dependence which  is  to  be  realized  only  by 
the  .collective  ownership  of  the  tools  of  in- 
dustrial production  by  the  several  groups 
of  persons  who  work  with  those  tools,  mis- 
conceives both  the  spirit  of  the  laboring 
classes  and  the  irresistible  tendency  of 
social  development  in  the  field  of  industrial 
production. 

If  the  ownership  of  the  tools  of  indus- 
trial production  is  profitable  to  the  capital- 


90        OPERATIVE  OWNERSHIP 

ist  owners,  such  ownership  would  be  prof- 
itable to  the  workers,  including  both  hand 
and  brain  workers.  If  the  small  measure 
of  control  which  the  workers  are  able  to 
exert  in  the  management  of  industry  under 
the  trade  agreement  system  is  an  advan- 
tage, the  complete  control  which  appertains 
to  complete  ownership  is  better.  If  the  in- 
crease in  the  wages  of  labor  which  it  is 
hoped  to  realize  through  trade  agreements 
is  good,  the  whole  produce  of  labor,  which 
would  go  to  the  laborers  when  they  should 
be  the  sole  owners  of  the  tools  of  labor,  with 
no  non- working  capitalists  to  take  any  part 
of  the  profits  in  the  form  of  dividends  or 
otherwise,  would  be  better. 

The  ownership  by  the  workers  of  the 
tools  and  materials  with  which,  and  upon 
which  they  work  is,  then,  the  ideal  condi- 
tion, from  the  workers'  point  of  view,  of 
industrial  production ;  and  whether  it  is  to 
be  achieved  by  the  plan  which  I  shall  sug- 
gest in  the  next  chapter  of  this  book,  or  by 
some  other  means,  that,  and  that  only,  is 
the  natural  and  logical  goal  of  trade-union- 
ism. 


CHAPTER  III. 
OPERATIVE  OWNERSHIP. 

THE  TERM  DEFINED. 

From  the  brief  examination  of  the  re- 
lations subsisting  in  the  industrial  world 
between  capital  and  labor  which  was  made 
in  the  preceding  chapters,  and  from  the 
condition  of  the  laboring  classes  in  their 
social  and  industrial  relations  thereby  dis- 
closed, it  is  obvious  that  some  means  must 
be  found  of  effecting  a  more  equitable  ap- 
portionment as  between  the  capitalist  and 
the  worker,  of  the  wealth  produced  through 
the  exercise  of  their  combined  functions,  as 
well  as  of  meeting  the  natural  and  reason- 
able aspirations  of  the  workers  for  some 
measure  of  industrial  self-government,  if 
the  strife  and  bitterness  of  class  warfare  is 
to  cease,  and  the  existing  social  order  is  to 
be  perpetuated.  Such  a  means,  I  confidently 
believe,  will  be  found  in  the  scheme  of  Oper- 
ative Ownership,  to  a  description  of  which 
the  present  chapter  will  be  devoted. 

Operative  Ownership,  as  the  term  indi- 
cates, means,  in  a  literal  sense,  as  applied 

91 


92        OPERATIVE  OWNERSHIP 

to  industrial  relations,  the  ownership  of  in- 
dustrial establishments  by  the  operatives 
collectively  who  are  employed  therein.  In 
another  and  less  exact  sense,  and  one  in 
which  it  will  be  sometimes  used  in  this  book, 
it  is  to  be  understood  as  applying  to  the  sys- 
tem herein  proposed  by  which,  after  pass- 
ing through  the  transitional  stages  of,  first, 
joint  operation  of  industrial  establishments 
by  the  capitalist  owners  and  the  operatives 
collectively,  and,  later,  joint  ownership  of 
these  establishments  by  capitalists  and  oper- 
atives, the  final  stage  of  the  system,  or  com- 
plete ownership  by  the  operatives,  will  be 
achieved. 

We  are  familiar  with  the  terms  "private 
ownership,"  "public  ownership,"  "munici- 
pal ownership,"  "government  ownership," 
and  the  like,  as  indicating  the  nature  of  the 
group  or  collectivity  by  which  a  given  in- 
dustry or  establishment  is  owned.  The 
term  Operative  Ownership  will  serve  a  like 
purpose  in  the  case  of  establishments  owned 
in  whole  or  in  part  by  the  operatives,  and 
while  indicating  the  nature  of  the  owner- 
ship of  establishments  exemplifying  that 
system,  it  will  also  serve  to  differentiate  the 
system  to  which  it  is  applied,  and  which  is 
essentially  co-operative  in  its  nature,  from 
other  schemes  which,  while  they  embody 


OPERATIVE  OWNERSHIP      93 

in  some  measure  the  fundamental  principle 
of  productive  co-operation,  are  neverthe- 
less radically  different  in  many  essential 
features  from  the  one  under  consideration. 

For  the  past  two  or  three  generations 
political  economists  and  statesmen  have 
labored  assiduously  to  devise  some  means 
to  eradicate  those  social  and  economic  evils, 
the  existence  of  which  provoked  that  dis- 
sension and  strife  between  labor  and  capital 
of  which  a  brief  description  was  attempted 
in  the  first  chapter,  and  which  of  late  years 
have  come  to  be  known  as  "the  war  of 
the  classes."  They  failed  because,  as  a  gen- 
eral rule,  they  confined  their  theorizing  or 
their  investigations,  which  was  the  sum  of 
their  achievements,  to  expedients  which 
would  not  conflict  with  the  principle  of  cap- 
italism, in  any  of  its  phases,  which  institu- 
tion they  seem  to  have  regarded  as  too 
sacred  or  too  powerful  to  be  assailed. 

Those,  on  the  other  hand,  who,  like  Marx, 
Engels,  Leibknecht,  and  others,  saw  nothing 
to  be  admired  or  respected  in  capitalism, 
went  to  the  opposite  extreme  of  regarding 
that  institution  as  the  sum  of  all  human  in- 
iquities, and  would  overthrow  not  only  the 
institution  itself,  but  the  whole  social  fabric 
upon  which  it  rests. 

Many  profound  observers  and  students  of 


94         OPERATIVE  OWNERSHIP 

social  and  economic  conditions,  however, 
have  regarded  capitalism  as  a  thing  neither 
too  sacred  to  be  assailed,  nor  so  vicious  that 
the  whole  social  fabric  must  be  overthrown 
because  of  it.  Such  persons  recognize  that 
the  existing  social  order,  the  central  idea 
of  which  is  the  right  of  private  property, 
does  not  to  any  extent  whatever  depend  on 
capitalism,  which  is  but  a  single  phase  of 
the  institution  of  private  property,  which 
latter  institution  existed  thousands  of 
years  before  capitalism  was  heard  of,  and 
would  persist  though  capitalism  in  every 
form  should  be  abolished. 

FUNDAMENTAL  ERROR  OF  THE  CAPITALIST 
THEORY. 

The  fundamental  principle  of  wage-capi- 
talism involves  the  assumption  that  labor 
is  a  commodity.  Upon  this  theory  capital- 
ism attempts  to  justify  its  treatment  of  the 
working  classes  and  its  conceptions  of  the 
relations  which  should  subsist  between  capi- 
tal and  labor.  This  theory  has  had  the  sup- 
port of  some  of  the  most  eminent  political 
economists  from  the  days  of  Adam  Smith 
to  the  present  time.  Even  many  of  the 
leaders  of  the  laboring  classes,  as  well  as 
writers  who  advocate  their  cause  as  against 
that  of  capitalism,  accept  this  theory  with- 


OPERATIVE  OWNERSHIP        95 

out  question.  That  it  is  fundamentally  un- 
sound is  susceptible  of  easy  demonstration. 
The  term,  "commodity/'  is  defined  as 
"goods,  wares,  merchandise ;  anything 
movable  which  is  or  can  be  bought  and 
sold."*  Human  labor  cannot  in  a  true  sense 
be  bought  and  sold  because  it  does  not  exist 
apart  from  the  laborer  who  performs  it. 
The  blood,  tissue,  energy,  and  intelligence, 
which  are  expended  in  the  form  of  labor  are, 
until  so  expended,  a  part  of  the  laborer  him- 
self;  and  to  buy  these  unexpended  elements 
of  potential  labor  it  would  be  necessary  to 
buy  the  laborer,  which  since  slavery  is 
abolished,  can  no  longer  be  lawfully  done. 
Labor  is  the  act  of  transforming  these  con- 
stituents of  the  human  organism,  in  combi- 
nation with  external  substances,  into  a  new 
product;  but  until  the  transformation  is  ac- 
complished the  human  elements  of  the  com- 
bination are  still  blood,  tissue,  energy  and 
intelligence;  while  after  the  transformation 
they  are  not  labor  but  the  product  of  the 
combination  above  mentioned.  The  textile 
manufacturer  may  buy  in  the  open  market 
the  wool,  cotton,  silk,  chemicals,  dye  stuffs 
and  other  wares  used  in  the  manufacture  of 
cloth.  These,  as  well  as  the  machinery  used 
in  manufacture,  may  be  bought  and  sold. 


^Webster's  Dictionary. 


96        OPERATIVE  OWNERSHIP 

They  are  chattels.  Between  them  and  the 
owner  or  vendor  there  is  no  physical  rela- 
tion or  connection.  The  manufacturer  buys 
his  machinery  and  materials;  he  may  em- 
ploy labor;  and  when  we  speak  of  employ- 
ing labor  we  mean  employing  the  laborer, 
since  labor  and  the  laborer  are  one  and  in- 
separable. If  labor  cannot  be  employed 
without  employing  the  laborer,  neither  can 
it  be  bought  without  buying  the  laborer. 
Not  being  a  subject  of  purchase  and  sale, 
labor  cannot  therefore,  in  any  true  sense, 
be  said  to  be  a  commodity. 

Capital,  however,  regarding  labor  as  a 
chattel  or  commodity  and  subject  to  pur- 
chase and  sale,  has  insisted  that  when  it  has 
purchased  labor  for  the  lowest  price  at 
which  it  may  be  obtained,  the  laborer  has 
no  more  right  to  claim  any  share  in  the  pro- 
duce of  his  labor  beyond  the  price  which  the 
capitalist  has  agreed  to  pay  for  it  in  the 
form  of  wages,  than  the  seller  of  any  of  the 
other  articles  used  in  productive  operations 
would  have  to  claim  a  share  in  the  products, 
beyond  the  agreed  price  of  the  thing  sold. 
To  this  manner  of  treatment  labor  is 
compelled  by  its  necessities  to  submit. 
It  cannot  work  without  tools,  nor  with- 
out materials  to  work  on.  The  tools  of 
modern  industry  are  costly  machinery. 


OPERATIVE  OWNERSHIP       97 

Modern  productive  processes  to  be  profit- 
able must  be  continuous.  This  requires  a 
large  amount  of  raw  materials  to  be  carried 
in  stock.  Machinery  and  materials  repre- 
sent capital,  which  the  laborer  lacks,  hence 
he  must  have  recourse  to  the  capitalist. 

MUTUAL  NEEDS  OF  CAPITAL  AND  LABOR. 

Machinery  will  not  operate  itself,  nor  will 
inanimate  materials  subject  themselves  to 
mechanical  operations.  These  are  the  func- 
tions of  labor;  and  these  the  capitalist,  as 
such,  cannot  perform.  Capital  and  labor 
are  powerless,  therefore,  to  carry  on  pro- 
ductive operations,  one  without  the  other. 
Their  mutual  interests  and  needs  impel  them 
to  combine,  but  capital  insists  on  dictating 
the  terms  upon  which  they  will  combine, 
namely:  that  labor  must  submit  to  be 
treated  as  a  commodity,  while  capital  con- 
trols the  productive  operations  and  appro- 
priates the  products. 

The  same  motives  of  expediency  and  just- 
ice which  from  very  remote  ages  have 
prompted  society  to  curb  the  physically 
strong  and  protect  the  physically  weak, 
when  the  former  would  use  their  strength 
to  oppress  the  latter  in  their  social  rela- 
tions, should  prompt  society,  it  would  seem, 
in  this  highly  civilized  and  enlightened  age. 


98        OPERATIVE  OWNERSHIP 

to  curb  the  industrially  strong  and  protect 
the  industrially  weak  where  the  former 
would  use  its  superior  strength  to  oppress 
the  latter  in  their  industrial  relations.  But 
society  looks  complacently  on  while  capital 
by  means  of  its  strength  imposes  upon  la- 
bor an  industrial  system  whereby  the  latter 
is  reduced  to  a  state  of  servility  to  the  for- 
mer when  both  should  stand  upon  an  equal- 
ity one  with  the  other. 

For  there  is  nothing  in  the  nature  of  the 
functions  performed  by  capital  and  labor, 
respectively,  operating  in  conjunction  with 
one  another  in  the  production  of  wealth, 
which,  of  itself,  gives  to  the  capitalist  the 
sole,  or  even  the  superior,  right  to  control 
absolutely  the  productive  operations,  and 
appropriate  to  itself  the  whole  product 
of  those  operations,  beyond  what  is  re- 
quired for  a  meager  or  even  a  &>mf ortable 
subsistence  for  the  laborer.  Indeed,  if  the 
relative  importance  of  the  respective  factors 
of  capital  and  labor  and  the  functions  which 
they  severally  perform,  were  to  be  taken  as 
the  criterion  of  their  respective  values,  it 
would  seem  that  labor  were  entitled  to  much 
the  larger  share  in  the  products. 

To  the  joint  operations  capital  contributes 
a  machine — a  composition  of  wood  or  metal, 
the  invention  and  the  handiwork  of  man.  A 


OPERATIVE  OWNERSHIP        99 

marvelous  contrivance,  it  may  be,  indeed, 
as  human  contrivances  go;  but  without  the 
hand  and  the  intelligence  of  man  to  guide 
and  operate  it,  a  mere  collection  of  metal  or 
wooden  parts.  Labor  contributes  to  the 
process  also  a  machine,  but  a  machine  of 
flesh  and  blood  and  intelligence.  A  machine 
not  of  man's  contrivance,  but  the  work — the 
masterpiece — of  God's  infinite  intelligence 
and  power,  as  far  transcending  in  its  mar- 
velous perfection  the  machine  of  human  con- 
trivance as  the  infinite  intelligence  and 
power  of  God  transcends  the  feeble  intelli- 
gence and  power  of  man. 

STRIFE  BETWEEN  CAPITAL  AND  LABOR. 

The  right  claimed  and  exercised  by  capi- 
tal to  dictate  the  terms  upon  which  it  will 
combine  its  functions  with  those  of  labor, 
however  speciously  it  may  be  defended  by 
certain  economists,  and  by  advocates  of  the 
theory  that  labor  is  a  chattel  or  commodity, 
has  its  true  foundation  therefore,  not  in  the 
greater  importance  of  its  contribution  to 
the  joint  operations,  but  in  the  strength  of 
capital  and  the  weakness  of  labor.  The 
owner  of  capital  may  use  it  for  productive 
purposes,  or  may  withhold  it  indefinitely 
from  such  use,  without  suffering  any  physi- 
cal discomfort.  The  laborer,  however,  must 


100       OPERATIVE  OWNERSHIP 

use  his  labor  productively,  and  without  loss 
of  time,  or  he  will  suffer  for  want  of  the 
necessaries  of  life.  But  since,  as  we  have 
seen,  the  laborer  cannot  work  without  tools 
and  materials,  which  the  capitalist  controls, 
there  is  produced  a  situation  in  which  the 
capitalist  is  enabled,  by  taking  advantage 
of  the  necessities  of  the  laborer,  to  force  the 
latter  to  accept,  instead  of  an  equitable 
share  in  the  product  of  their  joint  opera- 
tions, which  is  the  natural  recompense  of 
his  labor,  a  fixed  wage,  usually  the  lowest 
which  he  can  be  induced  or  forced  to  accept, 
while  the  capitalist  appropriates  the  entire 
product. 

Not  unresistingly,  however,  does  labor 
submit  to  the  hard  conditions  imposed  upon 
it  by  capital,  which  it  comes  to  regard  with 
a  feeling  of  hostility  as  its  exploiter  and 
oppressor;  but  carries  on,  through  the 
power  of  organization,  with  every  available 
weapon,  an  unremitting  warfare,  with  the 
purpose  of  wresting  from  capital  a  larger 
and  ever  larger  share  of  that  wealth  in  the 
creation  of  which  labor  is  a  factor  of  at 
least  equal  importance  to  capital;  while 
capital  organizes  to  resist  what  it  regards 
as  the  unreasonable  demands  of  labor. 
What  With  labor  organizing  to  lighten  or 
to  end  the  yoke  of  capital,  and  capital  organ- 


OPERATIVE  OWNERSHIP       101 

izing  to  perpetuate  the  yoke,  the  struggle, 
with  its  enormous  economic  loss,  and  the 
unutterable  suffering,  physical  and  mental, 
which  it  causes,  seems  likely  to  go  on  indefi- 
nitely, and  with  increasing  bitterness  until 
it  ends  in  revolution  or  Socialism. 

HOW  CLASS  WARFARE  MAY  BE  ENDED. 

In  the  industrial  experiences  of  society 
two  principles  have  been  developed  the  gen- 
eral adoption  and  application  of  which  to 
the  prevailing  industrial  conditions  would 
operate  to  place  the  industrial  relations  of 
society  upon  a  basis  of  social  justice,  and 
avert  the  danger  of  revolution  and  the  men- 
ace of  socialism,  to  one  or  both  of  which  the 
increasing  bitterness  of  the  class  struggle 
inevitably  tends. 

The  first  of  these  principles,  considered 
with  relation  to  the  chronological  order  of 
their  application,  consists  in  the  combining 
of  the  functions  and  the  resources  of  capi- 
tal and  labor,  respectively,  for  industrial 
operations,  not  under  conditions  of  sub- 
servience of  one  factor  or  group  to  the  other, 
but  on  terms  of  equality,  each  recognizing 
the  indispensability  of  the  other,  and  each 
participating  in  the  management  of  their 
joint  operations,  and  sharing  in  the  products 
of  such  operations  on  an  equitable  basis, 


102       OPERATIVE  OWNERSHIP 

under  a  mutual  arrangement  whereby  the 
labor  group,  besides  participating  in  the 
management  and  in  the  profits,  shall,  in 
process  of  time  and  on  certain  agreed  con- 
ditions, be  admitted  to  participation,  by 
purchase,  in  the  ownership  of  the  establish- 
ment in  which  they  thus  jointly  carry  on 
their  operations. 

The  second  of  these  principles  consists  in 
the  union  in  one  and  the  same  person  or 
group  of  the  functions  of  capitalist  and 
laborer. 

The  first  above  mentioned  principle  has 
been  exemplified  in  a  variety  of  schemes 
which  are  described  in  the  literature  of  co- 
operation under  the  general  appellation  of 
Labor  Co-partnership,  and  in  some  instances 
as  profit-sharing.  An  illustration  of  the 
principles  above  mentioned,  and  of  their 
practical  application,  in  successive  order,  as 
profit-sharing,  labor  co-partnership  and 
operative  ownership,  may  be  seen  in  the 
establishments  known  as  the  Maison  Le- 
claire,  of  Paris,  and  the  Familistere  Society 
of  Guise,  a  brief  account  of  which  was 
given  in  the  preceding  chapter. 

The  schemes  of  the  Maison  Leclaire  and 
of  M.  Godin,  the  founder  of  the  Familistere 
Society,  in  their  most  important  features, 
have  been  taken  as  models,  with  many  varia- 


OPERATIVE  OWNERSHIP       103 

tions  as  to  matters  of  detail,  by  many  other 
co-operative  establishments  which  are  still 
in  successful  operation.  These  establish- 
ments, like  those  above  named,  exemplify 
the  successful  application  of  the  principles 
of  participation  in  profits  with  capitalist 
ownership;  participation  in  profits  and 
management  with  joint  ownership,  and 
finally  the  union  of  the  functions  of  capi- 
talist and  workers  in  one  and  the  same 
group,  under  complete  Operative  Owner- 
ship. 

But  that  phase  of  industrial  development 
which  exemplifies  the  principle  of  the  union 
in  one  and  the  same  person  of  the  functions 
of  capitalist  and  worker  found  its  most  com- 
plete and  universal  application  in  the  indus- 
trial conditions  which  prevailed  in  the  time 
prior  to  the  invention  of  the  steam-engine 
and  the  establishment  of  the  factory  sys- 
tem. A  brief  description  of  the  then  pre- 
vailing industrial  methods,  and  of  the  con- 
dition of  the  laboring  classes  in  that  period, 
will  serve  to  illustrate  the  advantages 
that  may  be  expected  to  accrue  to  those 
classes  from  the  adaptation  of  this  prin- 
ciple to  modern  industrial  conditions,  in  the 
form  of  group,  or  operative  ownership. 


104      OPERATIVE  OWNERSHIP 

PRE-CAPITALIST  INDUSTRIES. 

In  the  time  referred  to,  before  the  fac- 
tory system  came  into  existence,  every 
tradesman,  after  he  had  passed  through 
the  preparatory  stages  of  his  craft — those 
of  apprentice  and  journeyman — owned  his 
own  shop,  his  own  tools,  and  in  most  cases, 
his  own  raw  materials.  There  was  no  wage 
question,  for  there  was  little  or  no  wages 
to  be  paid.  The  apprentice  not  only  re- 
ceived no  pay,  but  he  paid  for  the  oppor- 
tunity to  learn  his  trade.  The  journeyman, 
whose  position  was  usually  but  a  more  ad- 
vanced stage  of  apprenticeship,  received 
very  meager  wages  in  addition  to  his  board 
and  lodging;  but  out  of  such  wages  as  he 
received  he  saved  enough,  in  time,  to  pro- 
vide himself  with  the  necessary  tools  with 
which  to  become  a  master-workman.  For 
a  workshop  he  used  a  part  of  his  dwelling 
house,  or  an  inexpensive  outhouse  in  con- 
nection therewith.  His  stock  of  raw  ma- 
terials rarely  exceeded  the  needs  of  a  few 
days'  work,  and  involved  no  large  outlay. 
Thus  there  was  no  chance  for  dispute  be- 
tween capitalist  and  laborer,  for  the  func- 
tions of  capitalist  and  laborer  were  com- 
bined in  one  person.  Every  fully  equipped 
tradesman  was  his  own  capitalist  and  his 
own  laborer. 


OPERATIVE  OWNERSHIP       105 

Speaking  of  the  social  conditions  of  the 
tradesmen  of  this  period  Mr.  P.  Gaskell,  a 
writer  who  lived  in  the  time  before  capi- 
talism had  come  to  dominate  entirely  the 
field  of  productive  industry,  in  his  work  en- 
titled "The  Working  Population  of  Eng- 
land, Its  Moral,  Social  and  Physical  Condi- 
tions, and  the  Changes  Which  Have  Arisen 
From  the  Use  of  Steam  Machinery,"  pub- 
lished in  London,  1833,  says,  in  relation  to 
the  textile  industry,  which  may  perhaps  be 
taken  as  typical  of  productive  industry  in 
general: 

"It  may  be  termed  the  period  of  domestic 
manufacture;  and  the  various  mechanical 
contrivances  were  expressly  framed  for  this 
purpose.  The  distaff,  the  spinning  wheel, 
producing  a  single  thread,  and  subsequently, 
the  mule  and  jenny,  were  to  be  found  form- 
ing a  part  of  the  complement  of  household 
furniture,  in  almost  every  house  in  the  dis- 
trict where  they  were  carried  on,  whilst  the 
cottage  everywhere  resounded  with  the 
clack  of  the  hand  loom. 

"These  were,  undoubtedly,  the  golden 
times  of  manufacture.  .  .  .  It  is  true  that 
the  amount  of  labor  gone  through  was 
small;  that  the  quantity  of  cloth  or  yarn 
produced  was  but  limited — for  he  worked 
by  the  rule  of  his  strength  and  convenience. 


106       OPERATIVE  OWNERSHIP 

They  were,  however,  sufficient  to  clothe  and 
feed  himself  and  family  decently,  and  ac- 
cording to  their  station;  to  lay  by  a  penny 
for  an  evil  day,  and  to  enjoy  those  amuse- 
ments and  bodily  recreations  then  in  being. 
He  was  a  respectable  member  of  society;  a 
good  father,  a  good  husband  and  a  good 


son." 


Well  might  the  workingman  of  today,  de- 
pendent, as  we  have  seen  in  a  former  chap- 
ter, upon  so  many  conditions  over  which  he 
can  exercise  no  control  for  the  opportunity 
to  use  his  strength  and  his  skill  in  earning 
a  livelihood,  envy  the  capitalist-tradesman 
of  earlier  times  the  certainty  of  employ- 
ment; freedom  from  want  or  the  danger  of 
it,  whether  in  youth  or  old  age;  the  position 
of  independence;  the  social  respectability 
and  the  happy  domestic  environment,  which 
were  the  possessions  of  the  working  class 
before  the  functions  of  capitalist  and 
worker  were  separated  and  before  the  capi- 
talist arose  as — no  longer  the  worker,  but 
the  master  of  the  worker;  while  the  latter 
sank  to  the  position  of  a  servant,  dependant 
for  the  opportunity  to  earn  a  livelihood 
upon  the  will  of  the  capitalist 


OPERATIVE  OWNERSHIP       107 

ADAPTATION    OF   THE   PRINCIPLE    OF   WORK- 
ERS' OWNERSHIP  OF  THE  TOOLS  TO 
MODERN  CONDITIONS. 

It  is  not  of  course  possible,  nor,  from  the 
viewpoint  of  society  at  large,  is  it  desirable, 
to  restore  the  system  of  domestic  manu- 
facture; yet  the  essential  principle  of  that 
system — the  principle  of  the  combination 
of  the  functions  of  capitalist  and  laborer 
in  one  and  the  same  person — may  be  re- 
stored by  adapting  it  to  the  conditions  of 
modern  industry. 

Instead  of  the  simple  tools  with  which 
the  tradesman  of  pre-capitalist  times 
worked,  and  by  the  means  of  which  a  single 
tradesman,  working  with  many  tools,  car- 
ried the  process  of  production  of  a  given 
commodity  through  all  its  stages,  from  the 
raw  material  to  the  finished  product,  we 
have  in  our  modern  manufactories,  intri- 
cate and  costly  machinery,  by  means  of 
which  each  man,  and  sometimes  several  men, 
perform  only  a  single  operation  which  is 
but  a  small  part  of  the  long  and  complicated 
process  of  manufacture.  Production  on  a 
large  scale  is  thus  made  not  only  possible, 
but  for  the  sake  of  economy,  necessary.  The 
large  amount  of  capital  required  for  the 
purchase  of  costly  machinery  makes  the 
ownership  by  each  worker  of  the  tool  or  ma- 
chine with  which  he  works  impossible.  It 


108       OPERATIVE  OWNERSHIP 

would,  however,  be  easily  possible  for  two 
or  three  or  more  persons  who  work  with  a 
single  machine  to  own  the  machine  jointly, 
and  thus  the  principle  of  the  ownership  of 
the  tool  or  machine  with  which  men  worked 
in  the  time  referred  to,  would  be  applied, 
not  indeed  by  each  individual  worker,  but 
by  the  group. 

The  same  principle  would  be  carried  out 
in  large  establishments  by  all  the  operatives 
in  each  establishment  forming  themselves 
into  a  single  group,  owning  collectively  the 
entire  establishment,  including  buildings, 
raw  materials,  machinery,  finished  product, 
and  all  other  forms  of  capital  employed  in 
the  business.  Thus  by  the  universal  adop- 
tion of  a  system  of  group  ownership  instead 
of  individual  ownership,  an  ideal  method  of 
industrial  production,  regarded  not  alone 
from  the  viewpoint  of  the  laborer  but  also 
from  that  of  society  in  general,  would  be  es- 
tablished, whereby  the  workers  would  be  the 
sole  owners  of  the  tools  as  well  as  of  all  other 
forms  of  capital  with  which  they  operated ; 
the  functions  of  capitalist  and  laborer  would 
again  be  united;  the  social  evils  which  arose 
from  their  separation  would  disappear,  and 
the  worker  would  again  receive  the  whole 
produce  of  his  labor. 


OPERATIVE  OWNERSHIP       109 

DISTINGUISHED  ADVOCATES  OF  THE  PRINCIPLE. 

I  lay  no  claim  to  originality  in  the  advo- 
cacy of  the  principle  of  ownership  in  whole 
or  in  part  by  the  workers  in  industrial 
establishments  of  the  tools  with  which  they 
work.  It  has  been  advocated  by  many  emi- 
nent economists  and  publicists,  including 
some  of  such  high  authority  that  their  judg- 
ments, expressed  in  favor  of  any  economic 
proposition,  should  insure  for  that  propo- 
sition, the  serious  consideration  of  man- 
kind. 

John  Stuart  Mill  in  his  Principles  of  Polit- 
ical Economy  said:  "The  form  of  associa- 
tion, however,  which,  if  mankind  con- 
tinues to  improve,  must  be  expected  in  the 
end  to  predominate,  is  not  that  which  can 
exist  between  a  capitalist  as  chief  and  work 
people  without  a  voice  in  the  management, 
but  the  association  of  the  laborers  them- 
selves, on  terms  of  equality,  collectively 
owning  the  capital  with  which  they  carry 
on  their  operations,  and  working  under 
managers  elected  and  removable  by  them- 
selves."* 

Theodore  Roosevelt  has  said  again  and 
again  that  the  labor  question,  that  is  to  say, 
the  claim  of  the  laborer  to  a  just  share  of 

^Principles  of  Political  Economy,  by  John  Stuart  Mill, 
Vol.  2,  Ch.  VII,  Sec.  6. 


110      OPERATIVE  OWNERSHIP 

the  wealth  which  he  creates,  will  never  be 
settled  until  the  laborer  becomes  the  owner 
in  whole  or  in  part,  of  the  tools  with  which 
he  works.  In  his  speech  in  Chicago  at  the 
first  national  convention  of  the  Progressive 
Party,  called  in  the  newspaper  reports  of 
the  proceedings,  his  "Confession  of  Faith/' 
Mr.  Roosevelt  said: 

"Ultimately  we  desire  to  use  the  govern- 
ment to  aid,  as  far  as  can  safely  be  done, 
the  industrial  tool  users  to  become  in  part 
tool  owners,  just  as  the  farmers  now  are." 

Dr.  John  A.  Ryan,  a  writer  of  note  on 
sociological  topics,  in  the  course  of  his  de- 
bate with  the  Socialist  writer,  Morris  Hill-' 
quit,  in  Everybody's  Magazine  in  1913,  said: 
"Until  the  majority  of  the  wage-earners 
become  owners,  at  least  in  part,  of  the  tools 
with  which  they  work,  the  system  of  private 
capital  will  remain  in  Hilaire  Belloe's 
phrase,  'essentially  unstable'." 

OBSTACLES  TO  ITS  ADOPTION. 

But  how  are  the  wage-earners  to  become 
the  owners,  even  in  part,  of  the  tools  with 
which  they  work?  The  tools  of  modern  in- 
dustry— the  machinery,  materials  and  other 
forms  of  capital  by  means  of  which  indus- 
trial operations  on  a  large  scale  are  carried 
on — are  costly,  and  their  acquisition  would 


OPERATIVE  OWNERSHIP       111 

require  a  large  amount  of  capital  which  the 
workers  do  not  possess.  Moreover  these 
tools  are  now  owned  by  capitalists  who,  for 
the  most  part  find  them  highly  profitable 
investments,  and  would  be  unwilling  to  part 
with  them  to  the  workers  if  the  latter  were 
able  to  buy. 

While  many  economists  and  publicists 
have  recognized  that  the  true  and  final  so- 
lution of  the  labor  problem  lies  in  the  prin- 
ciple of  the  ownership  by  the  workers  of 
the  tools  with  which  they  work,  none,  so  far 
as  I  am  aware,  has  suggested  any  practical 
plan  by  which  that  condition  may  be  brought 
about  The  nearest  approach  to  a  sugges- 
tion of  such  a  plan  is  that  contained  in  the 
statement  of  Theodore  Roosevelt  quoted  in 
the  third  preceding  paragraph. 

But  although  he  has  not  formulated  any 
definite  plan  for  its  achievement,  Mr. 
Roosevelt,  in  the  short  sentence  above 
quoted,  has  suggested  the  means  by  which 
the  prediction  of  John  Stuart  Mill  in 
regard  to  collective  ownership  by  the 
workers  of  the  capital  with  which  they 
carry  on  their  operations,  as  quoted  in 
an  earlier  paragraph  of  this  chapter, 
may  be  realized.  Let  the  government 
but  aid  the  tool-users  to  become  in  part 
tool-owners,  not  by  means  of  subsidies,  or 


112      OPERATIVE  OWNERSHIP 

any  other  form  of  gratuity,  but  by  providing 
in  the  exercise  of  its  sovereign  functions  of 
administering  justice  and  promoting  the 
general  welfare,  for  an  equitable  adjust- 
ment of  the  relations  between  capital  and 
labor,  without  allowing  the  strength  of  one 
side  or  the  weakness  of  the  other  to  affect 
the  result,  so  that  the  workers  shall  receive 
a  just  share  of  the  wealth  which  they 
create,  while  capitalists  receive  a  fair  re- 
turn for  the  use  of  their  capital,  and  the 
tool-users  themselves  will  be  able  in  most 
cases,  in  time,  to  achieve  complete  owner- 
ship of  those  tools,  without  further  aid  from 
the  government,  and  in  a  manner  that  will 
receive  the  entire  approval  of  their  non- 
working  capitalist  associates.  How  this 
may  be  done  will  be  shown  in  a  latter  part 
of  this  chapter.  For  the  comparatively 
small  number  of  cases  in  which  such  ar- 
rangements cannot  be  effected  another 
form  of  government  aid  will  be  suggested. 
The  working  classes  have  been  advised, 
lectured  and  preached  to  for  generations, 
about  the  beauties  and  benefits  of  economy, 
industry,  thrift,  diligence  and  a  multiplicity 
of  other  social  virtues,  as  a  means  of  rising 
from  the  condition  of  wage-worker  to  that 
of  wage-payer;  or  at  least  of  gaining  a  suf- 
ficient competence  to  enable  them  to  engage 


OPERATIVE  OWNERSHIP       113 

in  some  independent  business.  With  the 
great  majority  of  them,  however,  the  cost 
of  living  approaches  too  close  to  their  earn- 
ing capacity  under  the  regime  of  wage-cap- 
italism to  admit  of  any  such  accumulation 
of  wealth  as  would  enable  them  to  rise 
above  the  position  of  wage-earner. 

Isolated  cases  may  have  occurred  in 
which,  through  the  intervention  of  some 
fortuitous  event  or  circumstance,  of  which 
possibly  the  possession  of  a  small  amount 
of  money,  the  fruit  of  years  Of  indus- 
try and  thrift,  may  have  enabled  some 
wage-earner  to  take  advantage,  and 
through  which  he  may,  in  time,  have 
risen  to  rank  among  the  captains  of 
industry.  But  in  the  vast  majority  of 
cases  the  wage-earner  considers  himself 
fortunate  if  with  all  the  advantages  that 
the  practice  of  the  virtues  above  mentioned 
can  give  he  is  able  to  keep  a  roof  that  he 
can  call  his  own  above  his  head,  while  rear- 
ing and  educating  a  family.  Even  this  is 
more  than  the  average  wage-earner  is  able 
to  do.  Save  and  economize  as  he  may — and 
very  many  make  the  effort,  as  the  very  large 
accumulations  in  savings  banks  show — he 
will  too  often  find,  to  his  sorrow,  that  loss 
of  employment,  sickness,  of  himself  or  some 
member  of  his  family,  or  some  other  reverse 


114      OPERATIVE  OWNERSHIP 

of  fortune,  may  dissipate  in  a  few  weeks 
the  savings  of  years. 

GOVERNMENT  AID. 

I  have  said  above  that  if  the  government 
in  the  exercise  of  its  sovereign  prerogatives, 
should  provide  for  an  equitable  adjustment 
of  the  relations  between  capital  and  labor, 
without  allowing  the  strength  of  one  side  or 
the  weakness  of  the  other  to  affect  the  re- 
sult; in  other  words,  if  the  capitalist  and  the 
workers  should  be  compelled  to  adjust  their 
industrial  relations  upon  a  basis  of  mutual 
equality,  with  justice  rather  than  power  as 
the  arbiter  in  their  negotiations,  the  result 
would  be  such  that  the  tool-users  them- 
selves, without  further  aid  from  the  gov- 
ernment, would  in  most  cases  be  able,  in 
time,  by  the  savings  which  such  an  adjust- 
ment would  make  possible,  to  achieve  com- 
plete ownership  of  the  tools  (the  machin- 
ery) which  they  use  in  their  industrial 
operations. 

The  reasons,  as  we  have  seen,  why  the 
tool-users  cannot  become  even  in  part,  tool 
owners  are  two-fold,  viz. :  because  the  pres- 
ent owners  of  those  tools  are  unwilling  to 
part  with  them,  and  because  if  they  were 
willing,  the  tool-users  have  not  the  means, 
nor  the  opportunity,  under  the  present 


OPERATIVE  OWNERSHIP       115 

wage-system,  of  earning  the  means,  with 
which  to  purchase  them,  or  any  substantial 
interest  in  them.  To  overcome  these  ob- 
stacles the  owners  must  be  induced,  or  in  a 
certain  sense  compelled,  to  transfer  (for 
full  value)  at  least  a  substantial  part  in  the 
ownership  of  those  tools;  and  either  the 
present  wage-system  must  be  so  changed 
that  the  workers  may  receive  a  larger  and 
more  equitable  share  of  the  wealth  which 
they  produce,  and  be  thereby  enabled  to  ap- 
ply a  portion  of  their  earnings  to  the  pur- 
chase of  a  share  in  those  tools,  or  the  capital 
required  for  such  purchase  must  be  sup- 
plied by  some  other  means  than  the  earn- 
ings of  the  workers.  These  things  can  only 
be  done  through  the  aid  of  the  government. 

MANNER  OF  ITS  USE. 

The  ways  and  means  by  which  the  aid  of 
the  government  may  be  used  to  enable  the 
tool-users  to  become,  at  least  in  part,  tool- 
owners  will  be  discussed  at  length  in  the 
next  following  chapter.  It  is  fitting,  how- 
ever, that  some  explanation  be  given  in  this 
connection,  of  the  plan  in  contemplation  for 
that  purpose. 

It  is  proposed  that  Congress  shall  enact, 
to  apply  to  industrial  establishments  of  na- 
tional consequence  as  concerning  interstate 


116       OPERATIVE  OWNERSHIP 

commerce,  a  law  authorizing  the  operatives 
in  any  such  establishment  to  organize  them- 
selves into  associations,  in  corporate  form, 
with  power  to  enter  into  arrangements  with 
the  owners  of  the  establishment  in  which 
the  members  of  such  association  are  em- 
ployed, for  joint  operation  of  such  estab- 
lishment by  the  capitalist  owners  and  the 
operatives  collectively,  and  joint  participa- 
tion in  the  profits  or  losses  thereof,  and,  for 
the  right  of  purchase  by  the  operatives, 
from  time  to  time,  or  after  an  agreed  num- 
ber of  years*  of  a  half  interest  in  the  estab- 
lishment. 

It  is  further  proposed  that  the  power  of 
eminent  domain  shall  be  granted,  under  the 
law  in  question  to  the  operatives'  associa- 
tions, to  the  end  that,  should  the  owners  of 
any  such  establishment  refuse  to  enter  into 
such  arrangements  with  their  operatives  as 
would,  in  the  opinion  of  the  court  or  gov- 
ernmental department  having  jurisdiction 
of  the  matter,  meet  the  requirements  of  so- 
cial justice,  such  association  might,  by  ap- 
propriate legal  proceedings  and  upon  just 
compensation  made,  condemn  and  take  over 
such  establishment,  substantially  as  may 
now  be  done  by  railway  and  other  public  or 
quasi-public  corporations,  where  private 
property  is  required  for  the  use  of  such  cor- 


OPERATIVE  OWNERSHIP      117 

porations.  Where  establishments  should  be 
thus  taken  over  by  the  operatives  it  is  pro- 
posed that  the  necessary  capital  be  supplied 
to  the  operatives  by  the  use  of  the  govern- 
ment credit,  somewhat  after  the  manner  in 
which  the  British  government  lent  its  credit 
to  the  tenant  farmers  of  Ireland  a  few  years 
ago,  to  enable  them  to  purchase  the  lands 
which  they  formerly  tilled  as  tenants,  with 
the  result  that  Ireland  has  been  trans- 
formed from  a  pauperized,  oppressed,  tur- 
bulent and  rebellious  country,  and  is  be- 
come, so  far  as  agrarian  conditions  are  con- 
cerned, a  prosperous,  peaceful  and  content- 
ed one. 

It  may  safely  be  assumed  that  the  capital- 
ists would  be  comparatively  few  who  would 
prefer  expropriation,  in  the  manner  above 
explained,  to  remaining  in  business  under 
conditions  which,  while  conforming  to  the 
demands  of  social  justice,  should  enable 
them  to  realize  a  good  return  for  the  use 
of  their  capital,  and  a  reasonable  compen- 
sation for  their  time  and  skill  as  managers, 
or  in  some  other  capacity,  should  they 
choose  to  so  apply  themselves. 

The  use  of  government  credit  for  the  pur- 
pose above  mentioned,  therefore,  would  sel- 
dom be  required,  but  when  required  would 
be  granted  under  such  safeguards  as  to 


118       OPERATIVE  OWNERSHIP 

eliminate  every  practical  possibility  of  loss 
to  the  government,  from  the  use  of  its 
credit  in  the  manner  proposed,  as  we  shall 
see  in  the  next  chapter. 

TRANSITION  FROM  CAPITALISM  TO  OPERATIVE 

OWNERSHIP. 

In  those  establishments  whose  owners 
should  elect  to  enter  into  arrangements 
with  their  operatives  for  joint  operation 
and  ultimately  joint  ownership  as  above 
mentioned,  the  transition  from  the  present 
system  of  wage-capitalism  to  that  of  com- 
plete Operative  Ownership  would  be  ac- 
complished in  three  successive  stages,  some- 
what after  the  plans  of  M.  Leclaire  and  M. 
Godin  described  in  the  foregoing  chapter, 
only  two  of  which  stages  would  be  in  any 
sense  compulsory  upon  the  capitalists — 
those  of  joint  operation  and  joint  owner- 
ship. The  step  from  joint  ownership  to  the 
third  and  final  stage,  that  of  complete  Op- 
erative Ownership,  could  only  be  taken  un- 
der the  plan  proposed,  with  the  free  and 
full  consent  of  both  capitalists  and  opera- 
tives, without  which  consent  the  relation  of 
joint  ownership  would  continue  indefinitely. 

In  the  first  stage  of  the  transition  the 
capitalists  and  operatives  would  continue  to 
exist  as  separate  groups,  exercising  their 


OPERATIVE  OWNERSHIP       119 

respective  functions  in  combination,  not,  as 
under  the  regime  of  wage-capitalism,  with 
one  group  subservient  to  the  other,  but  un- 
der arrangements  entered  into  on  terms 
of  mutual  equality,  each  group  partici- 
pating in  the  operation  and  management 
of  the  establishment,  and  sharing  in  the 
profits  in  proportion  to  the  current  value  of 
the  thing  which  it  contributed  to  the 
joint  operations,  namely,  the  use  of  capital 
by  one  group  and  the  labor  performed  by 
the  other.  A  definite  proportion  of  the 
operatives9  share  of  the  profits  would  be  re- 
served for  accumulation  in  a  fund  to  be 
maintained,  among  other  purposes  of  mu- 
tual benefit,  for  the  purchase,  from  time  to 
time,  or  after  a  certain  agreed  period,  of  a 
substantial  share,  in  the  ownership  of  the 
establishment,  the  right  to  make  such  pur- 
chase being  one  of  the  terms  of  the  arrange- 
ments above  mentioned. 

In  the  second  stage  of  the  transition  the 
operatives,  having  purchased  a  substantial 
share  in  the  ownership  of  the  establishment, 
would  become  joint  owners  with  the  non- 
working  capitalists,  and  receive,  in  addition 
to  the  share  in  the  profits  which  they  re- 
ceived as  workers,  in  the  first  stage,  a  fur- 
ther portion  of  the  profits  corresponding  to 
the  extent  of  their  interest  as  owners. 


120      OPERATIVE  OWNERSHIP 

This  would  leave  the  ownership  of  the  es- 
tablishment in  the  hands  of  two  classes  of 
capitalists — working  and  non-working.  The 
incentive  of  the  working  capitalists  to  own 
that  portion  of  the  capital  held  by  the  non- 
working  capitalists  being  as  we  shall  see  in 
the  next  chapter,  stronger  than  that  of  the 
non-working  capitalists  to  retain  it,  the  nat- 
ural result  would  be  that  the  latter,  in 
course  of  time,  would  be  induced  to  sell  their 
interest  to  the  former,  and  the  third  stage 
of  the  transition,  or  complete  Operative 
Ownership,  would  be  realized. 

In  all  of  the  transitional  stages  above 
mentioned  the  evils  of  wage-capitalism 
would  be  eliminated ;  the  workers  would  get 
their  just  share  of  the  wealth  which  they 
created;  and  the  capitalists,  working  and 
non-working,  would  receive  a  just  return 
for  the  use  of  their  capital  and  for  the  risk 
involved  in  its  use,  while  both  would  share 
in  the  fruits  of  their  joint  success. 

In  those  establishments  which  had  been 
taken  over  by  the  operatives  under  the 
power  of  eminent  domain,  and  by  the  use 
of  government  credit,  there  would,  of 
course,  be  no  intermediate  stages  between 
wage-capitalism  and  complete  Operative 
Ownership,  for  the  latter  system  would  be 
brought  into  operation  at  a  single  step;  the 


OPERATIVE  OWNERSHIP      121 

tool-users  would  become  tool-owners,  and 
the  laborer  would  possess  the  whole  produce 
of  his  labor. 

The  question  has  been  asked  if  it  would 
not  be  dangerous  to  thus  suddenly  entrust 
the  complete  control  and  management  of 
large  establishments  to  the  operatives  em- 
ployed therein,  possessing  neither  manage- 
rial ability  nor  experience? 

If  there  is  one  thing  which  may  be  con- 
sidered as  demonstrated  by  the  financial 
and  industrial  experience  of  society  during 
the  past  quarter  of  a  century,  it  is  that 
ownership  and  managerial  ability  as  ap- 
plied in  large  enterprises,  ^  have  no 
necessary  relation  one  to  the  other.  At 
the  time  of  the  last  official  census  of  the 
United  States  (1910)  the  amount  of  capital 
invested  in  all  the  railways  of  the  country 
was  approximately  $18,000,000,000,  a  sum 
nearly  equal  to  the  value  of  all  the  manu- 
facturing industries  of  the  country  com- 
bined. Yet  it  is  notorious  that  the  actual 
management  of  these  great  industries  is  in 
the  hands,  not  of  their  owners,  but  of 
salaried  officials  selected,  not  for  any  stock 
which  they  may  hold  in  the  industries 
which  they  manage,  but  for  their  man- 
agerial ability.  And  the  same  conditions 
exist  in  regard  to  the  management  of  many 


122       OPERATIVE  OWNERSHIP 

of  the  other  great  industries  of  the  coun- 
try. They  are  managed  by  salaried  men, 
not  by  their  owners. 

In  the  case  of  many  of  the  other  great 
industries  of  the  United  States  their  own- 
ers or  stockholders  are  scattered  through- 
out the  country  and  in  many  cases  never 
see  the  property  in  which  they  are  stock- 
holders. Yet  that  the  properties  are  suc- 
cessfully managed  the  financial  reports  of 
the  great  metropolitan  newspapers  as  well 
as  those  of  the  financial  journals  abundant- 
ly attest. 

To  those,  therefore,  who  would  ask  the 
question  stated  in  the  third  preceding  para- 
graph I  would  reply  by  asking  what  good 
reason  can  be  given  for  supposing  that 
stockholders  scattered  throughout  the  coun- 
try, who  never  see  the  property  they  own, 
and  know  little  more  about  it  than  may  be 
learned  from  the  daily  press  or  the  financial 
journals,  are  better  able  to  select  compe- 
tent and  successful  managers  than  would 
be  the  men  and  women  who  spend  their 
every  working  hour  in  the  establishment, 
who  see  its  every  operation  and  can  see 
when  things  are  going  well  and  when  they 
are  not? 


OPERATIVE  OWNERSHIP       123 

JOINT  OPERATION  DISTINGUISHED  FROM 
PROFIT-SHARING. 

It  has  happened  on  several  occasions  in 
the  course  of  friendly  conversations  on  the 
subject  of  Operative  Ownership  and  the 
transitional  stages  of  that  system  which  I 
have  designated  as  joint  operation  and  joint 
ownership  respectively,  that  when  I  thought 
I  had  made  perfectly  clear  the  nature  of  the 
system  of  Operative  Ownership  and  of  its 
transitional  stages  above  explained,  as  well 
as  the  exact  relations  which  would  subsist 
between  the  capitalists  and  the  workers  or 
operatives  in  each  stage,  I  have  been  met 
with  a  remark  or  a  question  from  some  of 
my  hearers  indicating  their  conception  of 
the  plan  proposed  to  be  that  of  a  more  or 
less  modified  form  of  the  system  of  profit- 
sharing.  I  am  admonished  by  this  circum- 
stance that  I  cannot  too  strongly  emphasize 
the  distinction  between  these  systems. 

The  erroneous  idea  of  similarity  between 
Operative  Ownership,  in  the  stages  men- 
tioned, and  profit-sharing,  arose,  I  think, 
from  a  misapprehension  of  the  nature  and 
effects  of  profit-sharing. 

Profit-sharing,  in  the  sense  in  which  that 
system  is  most  generally  exemplified,  is  the 
giving  of  a  small  percentage  of  the  net 
profits  of  an  establishment  to  the  workers 


124       OPERATIVE  OWNERSHIP 

therein,  in  addition  to  their  ordinary  wages, 
as  an  incentive  to  extraordinary  care  and 
diligence  in  their  work.  This  share,  except 
in  the  case  of  a  comparatively  few  estab- 
lishments, is  insignificant  in  amount,  gen- 
erally ranging  from  five  to  ten  per  cent  of 
their  ordinary  wages,  and  representing  but 
a  part  of  the  increased  profits  resulting 
from  their  increased  efficiency  produced* 
by  the  hope  of  additional  reward.  But 
though  the  workers'  share  of  the  profits 
be  small  it  serves  the  employer  as  an 
insurance  against  strikes  and  a  weapon 
against  organized  labor,  for  it  is  either 
made  a  condition  of  participation  in 
the  profits  that  the  workers  shall  not  be- 
long to  a  labor  union,  or  the  privilege  is 
given  in  such  a  manner  as  to  produce  a  sense 
of  obligation  in  the  workers  for  the  bene- 
fits received,  which  deters  them  from  de- 
manding an  increase  in  wages,  or  better 
hours  or  conditions  of  labor,  which  would 
often  bring  them  more  substantial  benefits 
than  would  the  small  addition  to  their  wages 
which  their  share  in  the  profits  would  be. 
"As  usually  employed,"  writes  one  who  is 
a  prominent  figure  in  the  councils  of  organ- 
ized labor,  in  regard  to  profit-sharing,  "it  is 
a  method  for  bribing  the  workman  to  re- 
main outside  of  the  union  of  his  craft,  to 


OPERATIVE  OWNERSHIP      125 

discourage  demands  for  better  wages,  to 
stimulate  output  and  increase  profits  for 
the  employer,  the  workman  to  receive  a 
small  share  of  his  increased  earnings."' 

Between  profit-sharing  and  those  earlier 
stages  of  Operative  Ownership  which  I  have 
designated  elsewhere  in  this  book  as  joint 
operation  and  joint  ownership,  there  is  little 
or  nothing  in  common.  Under  profit-shar- 
ing the  worker  has  no  voice  in  the  manage- 
ment of  the  establishment  in  which  he 
works;  his  share  in  the  profits  forms  but  a 
trivial  addition  to  his  wages,  and  is  arbi- 
trarily fixed  by  the  employer;  and  he  is  de- 
prived of  freedom  of  action  in  regard  to 
associating  himself  with  others  of  his  craft 
for  the  purpose  of  advancing  their  common 
interests. 

Under  Operative  Ownership  on  the  con- 
trary, even  in  its  earlier  stages,  the  workers 
are  to  have  an  effectual  voice  in  the  man- 
agement of  the  business,  and  receive  an 
equitable  share  in  the  profits  the  extent  of 
which  is  not  determined  by  the  arbitrary 
will  of  a  capitalist  employer.  For  there  will 
be  neither  employer  nor  employee,  under 
Operative  Ownership,  but  the  capitalist  will 

*J.  C.  Skemp,  Grand  Secretary-Treasurer  of  Painters, 
Decorators  and  Jpaperhangers  Union  of  America,  as  quoted 
in  Profit-Sharing  by  American  Employers,  published  by  the 
National  Civic  Federation. 


126       OPERATIVE  OWNERSHIP 

be  the  partner  in  a  real  sense,  of  the  work- 
ers. Capitalist  and  workers  alike  will  share 
in  the  profits  in  proportion  to  what  they 
have  respectively  contributed  to  their  pro- 
duction, and  the  workers  will  be  free  to  as- 
sociate themselves  with  others  of  their 
craft  as  their  interests  or  sympathies  may 
prompt. 

The  stages  of  joint  operation  and  joint 
ownership  are  to  be  compared  rather  to  the 
system  of  labor  co-partnership  described  in 
the  last  preceding  chapter,  which  they 
strongly  resemble,  with  the  added  advan- 
tage in  favor  of  the  former  that,  even 
under  labor  copartnership  the  share 
of  the  profits  which  the  workers  re- 
ceive, or  the  extent  of  the  interest 
which  they  may  collectively  or  indi- 
vidually own  in  the  establishment  is  arbi- 
trarily fixed  by  the  capitalist  employers  in 
the  first  instance,  while  in  the  case  of  joint 
operation  the  workers'  share  in  the  profits 
is  determined  by  the  equitable  rule  of  distri- 
bution in  proportion  to  what  they  contrib- 
ute, as  above  stated,  and  the  extent  of  the 
interest  in  the  establishment  which  the 
workers  collectively  shall  be  entitled  to  ac- 
quire by  purchase  with  their  accumulated 
profits  is  a  fundamental  part  of  the  scheme 
proposed. 


OPERATIVE  OWNERSHIP       127 

In  an  article  contributed  to  a  pamphlet 
published  by  the  National  Civic  Federation 
entitled  "Profit-Sharing  by  American  Em- 
ployers," (1916),  by  Mr.  J.  W.  Sullivan,  gen- 
eral lecturer  for  the  American  Federation 
of  Labor,  in  which  article  the  systems  of 
profit-sharing  and  labor  co-partnership  are 
compared,  and  in  which  the  former  is  se- 
verely condemned,  that  writer,  quoting  with 
approval  from  another,  says  in  regard  to 
labor  copartnership :  "Owning  collect- 
ively the  tools  they  use  the  workers 
gain  the  sense  and  dignity  of  possession." 
"Possession  has  a  strong  educative  influ- 
ence; it  lifts  and  elevates  the  mind  of  the 
employee,  gives  him  a  new  interest  in  life, 
broadens  his  outlook  on  public  affairs, 
strengthens  his  grit  and  character  and 
makes  him  a  better  citizen."  "Copartner- 
ship," writes  Mr.  Sullivan,  further  in  the 
article  referred  to,  "aims  to  absorb  what 
share  of  industry  it  can  through  peaceful 
and  legal  measures — contract,  compensa- 
tion, step  by  step  education  in  business  and 
co-operative  methods.  It  seizes  legitimate 
opportunity  to  place  laborers  with  their  own 
capital  in  the  position  now  occupied  by  cap- 
italists and  laborers." 


128       OPERATIVE  OWNERSHIP 

All  that  has  been  said  by  Mr.  Sullivan  in 
regard  to  labor  co-partnership  may  be  as 
truly  said  of  the  more  complete  labor  co- 
partnership of  Operative  Ownership.  The 
error  of  conceiving  joint  operation  or  joint 
ownership  as  modified  forms  of  profit-shar- 
ing, could  not,  therefore,  arise  in  the  mind 
of  any  one  who  was  familiar  with  both  sys- 
tems. 


CHAPTER  IV. 
WAYS  AND  MEANS. 

RIGHTS  OF  PROPERTY  SACRED. 

In  the  scheme  proposed  in  this  book  for 
the  establishment  of  Operative  Ownership 
the  rights  of  property  of  the  capitalist  own- 
ers of  the  means  of  industrial  production 
will  be  regarded  as  sacred  and  inviolable. 
Those  who  maintain  that  the  system  of 
wage-capitalism,  by  which  many  or  all  of 
the  great  fortunes  employed  in  industrial 
production  were  made,  is  robbery  of  the 
laboring  classes,  and  that  therefore  those 
classes,  could  they  get  control  of  the  ma- 
chinery of  government,  would  be  justified 
in  confiscating  the  property  thus  employed, 
will  find  no  aid  nor  comfort  in  the  scheme 
herein  proposed.  The  capitalist  system  may 
be  altogether  wrong.  I  believe  I  have  shown 
in  the  preceding  chapters  that,  in  at  least 
one  of  its  phases,  it  is  so;  but  its  severest 
critic  must,  in  fairness,  admit  that  the  ques- 
tion as  to  its  justness  or  un justness  is  con- 
sidered by  very  many  enlightened  persons 
to  be  at  least  a  debatable  one,  while  the 

129 


130       OPERATIVE  OWNERSHIP 

preponderance  of  public  opinion  is  upon  the 
side  of  capitalism. 

The  methods  by  which  the  capitalists' 
wealth  was  acquired  were  such  as  have  re- 
ceived the  sanction  of  law  in  every  civilized 
land,  from  the  birth  of  the  capitalist  sys- 
tem to  the  present  time,  during  which  time 
the  highest  ethical  standards  have  prevailed 
to  which  the  human  race  has  yet  attained. 

In  the  progress  of  time  the  moral  stand- 
ards of  society  change.  The  thing  which  in 
one  generation  is  regarded  as  entirely  con- 
sistent with  the  highest  moral  standards 
may,  by  a  later  generation,  be  condemned 
as  utterly  wicked  and  depraved.  A  single 
instance,  of  the  many  which  might  be  cited 
from  history,  will  suffice  to  illustrate  this 
truth. 

At  the  time  of  the  establishment  of  the 
United  States  the  institution  of  human 
slavery  existed  in  many  states,  and  was 
considered  to  be  entirely  consistent  with  the 
highest  social,  ethical  and  religious  stand- 
ards. Scarcely  half  a  century  has  passed 
since  hundreds  of  thousands  of  men  shed 
their  blood  to  perpetuate  it.  And  yet,  to- 
day, hardly  a  man  is  to  be  found  to  speak 
a  word  in  its  favor,  even  among  the  sur- 
vivors or  the  descendants  of  those  who 
fought  to  preserve  it 


WAYS  AND  MEANS  131 

VIEWS  OF  SOCIETY  CHANGING. 

The  views  of  society  are  changing  today 
— they  have  been  undergoing  a  change  for 
years — on  the  subject  of  wage-capitalism. 
Multitudes  of  people  have  come,  and  other 
multitudes  who  have  seriously  studied  and 
reflected  on  the  subject  are  coming,  to  real- 
ize the  injustice,  as  well  as  the  inexpediency, 
regarded  from  the  view  point  of  public  pol- 
icy, of  a  system  which  enables  one  numer- 
ically small  class  of  society,  through  the 
power  which  the  possession  of  wealth  gives 
it,  to  impose  poverty,  misery,  suffering  and 
ofttimes  death,  upon  another  class,  by  ap- 
propriating to  itself  an  undue  share  of  that 
wealth  which  is  the  joint  product  of  both 
classes,  giving  to  the  latter  class  a  portion 
insufficient  in  most  cases  for  its  subsistence 
in  a  condition  of  decent  living,  and  in  very 
many  cases  insufficient  for  the  preservation 
of  life  and  health. 

We  have  seen  in  the  preceding  chapter 
that  the  ideal  form  of  industrial  production, 
having  regard  to  its  effect  upon  the  social, 
physical  and  moral  well-being  of  the  work- 
ers, is  that  in  which  they  own,  individually 
or  in  group,  the  tools  or  machinery  with 
which  they  work,  and  thus,  combine  in 
themselves  the  functions  of  capitalist  and 
laborer,  which  combination  of  functions  as 


132      OPERATIVE  OWNERSHIP 

there  explained,  is  the  essential  principle  of 
the  system  of  Operative  Ownership.  We 
have  now  to  consider  of  ways  and  means  by 
which  the  universal  adoption  of  that  system 
may  be  brought  about 

OBSTACLES  TO  OPERATIVE  OWNERSHIP. 

At  the  outset  we  are  confronted  with  two 
serious  obstacles  which  must  be  met  and 
overcome  before  the  achievement  of  this 
purpose  may  be  hoped  for.  These  are:  (1), 
the  fact  that  nearly  all  industrial  establish- 
ments are  at  present  in  the  hands  of  capi- 
talist owners  who  have  no  disposition  to 
part  with  them  to  their  operatives,  and  (2), 
the  further  fact  that  if  the  capitalist  owners 
were  willing  to  transfer  their  establish- 
ments to  their  operatives  at  their  full  value, 
the  latter  have  not  the  capital  with  which 
to  purchase  them. 

For  the  reason  shown  in  the  last  preced- 
ing chapter,  namely:  the  absence  of  any 
margin  for  possible  savings  under  wage- 
capitalism  between  the  earning  capacity 
and  the  cost  of  living  of  the  average  work- 
ingman,  it  is  hopeless  to  expect  that,  under 
that  system  of  industry,  the  operatives,  col- 
lectively, will  ever  be  able,  unaided,  to  buy 
out  their  capitalist  employers.  If,  there- 
fore, Operative  Ownership — that  is  to  say, 


WAYS  AND  MEANS  133 

the  ownership  of  the  tools  of  industry  by 
the  tool-users — is  ever  to  be  realized,  some 
other  means  than  the  savings  of  the  opera- 
tives under  the  capitalist  wage-system,  must 
be  found,  to  provide  them  with  the  neces- 
sary capital;  and  some  means  of  compelling 
its  adoption  must  be  devised,  rather  than 
leave  it  to  the  choice  of  the  employer  to 
adopt  it  or  not  as  he  may  see  fit 

EXAMPLES  OF  BENEVOLENT  CAPITALISTS/ 

Many  cases  may  be  found  in  the  litera- 
ture of  co-operation  in  which,  through  the 
benevolence  or  sense  of  justice  of  certain 
capitalist  employers,  their  employees  were 
given  a  substantial  share  in  the  profits  of 
the  employer's  business,  which,  being  al- 
lowed to  accumulate,  enabled  the  employees 
collectively,  in  course  of  time  to  buy  out 
their  employers,  and  establish  the  system  of 
Operative  Ownership  in  those  particular  es- 
tablishments. In  one  case,  that  of  the 
Familistere  Society  of  Guise,  mentioned  in 
a  preceding  chapter,  all  the  profits  of  the 
business  in  excess  of  a  moderate  rate  of  in- 
terest or  dividend  on  capital  were  annually 
given  to  the  operatives  and  applied  to  the 
purchase  of  certificates  representing  an  in- 
terest in  the  establishment,  which  in  time 
resulted  in  the  complete  transfer  of  owner- 


134       OPERATIVE  OWNERSHIP 

ship  to  the  operatives.  Many  similar 
schemes  have  been  adopted  which  in  time 
developed  into  partial  or  complete  Opera- 
tive Ownership.  In  all  such  cases  the  adop- 
tion of  the  co-operative  plan  was  the  volun- 
tary act  of  the  capitalist  employer.  But  ex- 
perience has  shown  that  the  ratio  of  em- 
ployers of  this  character  to  the  total  num- 
ber of  employers  is  so  small  that  it  would 
require  many  generations  for  Operative 
Ownership  to  become  universally  adopted, 
if  it  depended  on  the  voluntary  acts  of  capi- 
talist employers.  Such  cases  are  valuable, 
however,  as  suggesting  a  means  by  which 
the  industrial  tool-users  may,  through 
their  own  industry  become  tool-owners, 
namely;  by  the  successive  stages  of  joint  op- 
eration, joint  ownership,  and,  finally,  sole 
ownership,  of  the  establishments  in  which 
they  work,  to  be  acquired  by  purchase  with 
the  savings  which  participation  in  the 
profits  on  an  equitable  basis  enabled  them 
to  accumulate,  as  shown  in  the  foregoing 
chapter. 

The  means  thus  suggested  however,  re- 
quires for  its  successful  application,  that 
some  plan  be  devised  whereby,  without  vio- 
lating their  legal  or  ethical  rights  of  prop- 
erty or  person,  capitalists  might  be  com- 
pelled to  adopt,  in  their  relations  with  their 


WAYS  AND  MEANS  135 

operatives,  a  system  whereby,  while  them- 
selves receiving  a  just  and  reasonable  re- 
turn for  the  use  of  their  capital,  labor  would 
receive  a  living  wage,  and  the  profits  in 
excess  of  these  items  would  be  equitably 
apportioned  between  the  two.  Thus  with 
surplus  earnings  in  excess  of  the  bare  ne- 
cessities of  a  decent  living,  the  workers 
would  be  able  to  save  a  portion  of  such  sur- 
plus earnings,  by  combining  and  systematic- 
ally accumulating  which,  they  would,  in 
process  of  time,  be  able  collectively  to  pur- 
chase a  part,  and  ultimately  the  whole,  of 
the  establishment  in  which  they  worked. 

Among  the  most  important  powers  as 
well  as  the  most  imperative  duties  which 
appertain  to  the  quality  of  sovereignty  in 
any  state  or  nation  are  those  of  administer- 
ing justice  and  of  promoting  the  general 
welfare.  In  the  exercise  of  these  powers  it 
is  competent  for  the  State  to  impose  such 
restraints  upon  the  use  of  property,  and 
upon  the  right  of  contract  in  relation  there- 
to, as  justice  or  the  general  welfare  shall 
require.  This  power  extends  even  to  the 
taking  of  private  property,  upon  making 
full  compensation  therefor  to  the  owner, 
when  the  general  welfare  requires  such 
taking.  The  power  when  thus  exercised  is 
called  the  power  of  eminent  domain,  under 


136      OPERATIVE  OWNERSHIP 

which  title  it  will  be  further  discussed  in  a 
later  part  of  this  chapter.* 

The  quality  of  sovereignty  involves  the 
right,  as  against  any  power  within  the 
State,  to  exercise  or  to  refrain  from  exer- 
cising any  of  its  powers;  and  the  right  to 
refrain  involves  the  right  to  impose  terms, 
as  an  alternative  to  the  exercise  of  such 
power,  upon  those  who  would  directly  profit 
by  the  non-exercise  thereof.  Thus,  in  the 
exercise  of  its  sovereign  powers,  the  State, 
in  furtherance  of  justice  and  the  general 
welfare,  may  authorize  the  taking  over  of 
all  industrial  establishments  by  the  opera- 
tives therein,  through  the  power  of  eminent 
domain,  and  with  the  aid  of  government 
credit;  or  it  may  provide  that  no  establish- 
ment shall  be  thus  taken  over,  the  owner  of 
which  is  willing  to  enter  into  arrangements 
with  the  operatives  whereby  such  establish- 
ment may  be  operated  upon  terms  con- 
sistent with  social  justice  and  the  general 
welfare  such  as  that  the  operatives  shall 
have  an  effectual  voice  in  the  management 
of  the  establishment,  an  equitable  share  in 
the  profits  thereof,  and  the  right  to  pur- 
chase, from  time  to  time  or  after  a  reason- 


*The  taking  of  property  under  the  power  of  eminent  do- 
main, upon  compensation  made,  is  not  to  be  confounded 
with  its  taking  under  the  police  power,  without  compensa- 
tion, which  will  be  discussed  in  a  later  chapter. 


WAYS  AND  MEANS.  137 

able  and  definite  term  of  years,  an  equal 
share  with  the  capitalist  share-holders,  in 
the  ownership  of  the  establishment 

Thus  the  condition  whereby  the  tool-users 
were  enabled  in  isolated  cases,  to  become 
tool-owners  through  the  sense  of  justice  or 
the  benevolence  of  capitalist  employers,  to 
which  repeated  references  have  been  made 
in  the  foregoing  pages,  would  be  realized  in 
course  of  time,  in  the  great  majority  of  in- 
dustrial establishments,  by  operation  of  law, 
where  motives  of  justice  or  benevolence  had 
failed  to  produce  that  result;  while  in  the 
comparatively  few  cases,  as  we  shall  later 
see,  in  which  the  capitalists  might  be  un- 
willing to  enter  into  arrangements  of  the 
character  mentioned  in  the  foregoing  para- 
graph, with  the  operatives,  they  might  be 
subjected  to  compulsory  sale  of  their  estab- 
lishments to  the  operatives  under  the  power 
(if  eminent  domain,  in  which  event  the  tool- 
users  in  such  establishments  would  at  once 
become  tool  owners. 

EMINENT  DOMAIN. 

I  have  said  in  the  beginning  of  this  chap- 
ter that  under  the  plan  which  I  should  pro- 
pose for  the  establishment  of  Operative 
Ownership  the  rights  of  property  of  capi- 
talist owners  of  industrial  establishments 


138      OPERATIVE  OWNERSHIP 

should  be  held  sacred  and  inviolable.  But 
to  many  the  plan  of  involuntary  expropria- 
tion through  the  power  of  eminent  domain 
suggested  in  the  last  preceding  paragraph, 
will  seem  at  variance  with  that  statement. 
A  true  understanding  of  the  nature  of  the 
power  of  eminent  domain,  and  of  the  limita- 
tions which  that  power  places  upon  the 
rights  of  private  property,  will  show  that 
the  taking  of  property  by  virtue  of  that 
power  involves  no  such  violation,  for  as 
against  the  power  of  eminent  domain,  no 
rights  of  private  property  exist.  It  is  de- 
sirable therefore  that  the  nature  of  this 
power,  which  as  an  attribute  of  sovereignty 
takes  precedence  of  all  private  rights,  may 
be  clearly  understood. 

Eminent  domain  is  that  power,  inherent 
in  every  sovereign,  by  which  private  prop- 
erty may  be  taken  for  public  use  upon  mak- 
ing full  compensation  therefor  to  the  own- 
er. A  familiar  example  of  the  exercise  of 
this  power  is  seen  in  the  taking  of  property, 
by  condemnation,  for  railway  purposes. 
Other  examples  of  the  exercise  of  that  pow- 
er are  the  taking  of  land  for  use  as  a  high- 
way, or  for  streets,  parks,  public  buildings 
and  the  like.  In  every  such  case  the  right 
of  the  State,  or  its  lawfully  delegated  agen- 
cies,  to  take  property  is  absolute,  and  the 


WAYS  AND  MEANS  139 

only  conditions  precedent  to  thp  taking  are 
the  judicial  ascertainment  of  the  value  and 
its  payment. 

While  this  power  may  not  ordinarily  be 
used  to  compel  the  transfer  of  property 
from  one  person  or  group  to  another,  it 
may  be  so  used  when  such  transfer  is  re- 
quired in  furtherance  of  some  general  plan 
designed  by  the  legislative  power  to  pro- 
mote the  general  welfare. 

Eminent  domain  is  defined  by  Justice 
Cooley,  the  eminent  American  jurist  and 
law  writer,  to  be  "that  superior  right  of 
property  pertaining  to  the  sovereignty,  by 
which  the  private  property  acquired  by  its 
citizens  under  its  protection  may  be  taken, 
or  its  use  controlled,  for  the  public  benefit, 
without  regard  to  the  wishes  of  the  own- 
ers."* "Title  to  property,"  says  the  same 
author,  "is  always  held  upon  the  implied 
condition  that  it  must  be  surrendered  to  the 
government,  either  in  whole  or  in  part,  when 
the  public  necessities,  evidenced  according 
to  the  forms  of  law,  demand."** 

EMINENT  DOMAIN  AN  OPTION  OF  PURCHASE. 

Thus  it  will  be  seen  that  the  right  of  emi- 
nent domain  is,  in  effect,  an  option  of  pur- 

*Constitutional  Limitations,  p.  524. 

**Ibid,  quoting  People  v.  Mayor,  etc.,  32  Barb.  112. 


140      OPERATIVE  OWNERSHIP 

chase  upon  every  dollar's  worth  of  private 
property  in  the  country,  which  option  may 
be  exercised  whenever  the  public  good  re- 
quires it.  This  power  may  be  delegated  by 
law  to  any  agency  or  corporate  body  to 
which  the  legislative  body,  in  the  exercise 
of  its  constitutional  powers,  may  see  fit  to 
delegate  it,  whether  it  be  a  municipal  cor- 
poration, a  railway  corporation,  or  an  in- 
corporated association  of  operatives,  as  the 
public  interests  may,  in  the  opinion  of  the 
legislative  body,  require. 

Nor  can  the  owner  of  property  so  taken 
jtestly  complain  if  the  government,  or  its 
delegated  representatives,  see  fit,  on  proper 
and  lawful  occasion,  to  exercise  the  power 
or  option  so  reserved  or  delegated,  since 
such  owner  is  presumed  to  have  acquired 
and  accepted  the  property  in  question  with 
full  knowledge  of  the  right  of  the  govern- 
ment to  take  it,  in  the  event,  and  upon  the 
condition,  above  stated. 

Should  the  sovereign  people,  therefore, 
through  their  legally  constituted  govern- 
mental agencies,  believing  the  system  pro- 
posed in  this  book  as  a  substitute  for  wage- 
capitalism  to  be  conducive  to  justice  and  the 
general  welfare,  see  fit  to  lend  their  aid  by 
the  use  of  their  credit,  and  by  the  exercise 
or  delegation  of  the  right  of  eminent  do- 


WAYS  AND  MEANS  141 

main,  in  establishing  that  system,  they 
would  be  well  within  the  limits  of  their 
legitimate  powers  in  so  doing. 

EMINENT  DOMAIN  AND  GOVERNMENT  CREDIT. 

While,  as  we  have  seen,  it  is  improbable 
that  any  considerable  proportion  of  capital- 
ists would  elect  to  allow  themselves  to  be 
subjected  to  expropriation  in  preference  to 
entering  into  arrangements  of  the  character 
already  described  with  the  workers,  it  is 
probable  that  some  would  so  elect;  and 
whilst  their  number  might  be  few  in  com- 
parison with  those  who  would  be  willing  to 
enter  into  the  arrangements  mentioned, 
they  might  in  the  aggregate  represent  a 
very  large  amount  of  capital.  To  ask  the 
government  to  assume  the  risk  involved  in 
aiding  the  operatives,  by  the  use  of  its 
credit,  to  obtain  the  capital  which  would  be 
required  to  compensate  the  capitalist  own- 
ers, whose  property  would  be  thus  taken 
through  the  power  of  eminent  domain,  is  a 
matter  requiring  the  most  serious  consider- 
ation. In  this  spirit  the  question  will  be 
treated  in  the  following  pages,  and  I  believe 
that  I  shall  be  able  to  show  that  the  risk  in- 
volved to  the  government  will  be  insignifi- 
cant, while  the  benefits  to  be  gained,  not 
alone  by  the  comparatively  small  num- 


142       OPERATIVE  OWNERSHIP 

ber  of  operatives  who  would  be  direct 
beneficiaries  of  the  government  aid,  in  cases 
of  expropriation,  but  also  by  the  vastly 
greater  number  who  as  the  result  of  a  law 
being  in  existence  authorizing  such  expro- 
piration,  would  be  admitted,  on  a  basis  of 
substantial  justice  as  between  capitalist  and 
worker  to  participation  with  their  former 
employers  in  the  management  and  the  prof- 
its of  the  establishments  in  which  they 
work;  and  that,  in  addition  to  the  benefits  to 
be  gained  by  the  workers,  the  benefits  that 
would  accrue  to  society  in  general,  through 
the  cessation  of  class  warfare ;  the  general 
diffusion  of  wealth;  the  increased  regard 
for  the  rights  of  property;  and  in  many  oth- 
er ways,  would  be  incalculable.  Next  to 
securing  to  its  people  the  blessings  of  lib- 
erty, there  is  no  other  way  in  which  the  re- 
sources of  a  nation  could  be  better  em- 
ployed than  in  the  establishment  of  justice 
and  the  promotion  of  domestic  peace  and 
tranquility,  in  industrial  no  less  than  in  po- 
litical, relations ;  and  what  other  industrial 
system  can  so  powerfully  contribute  to  the 
establishment  of  industrial  peace  on  a  last- 
ing foundation  as  one  in  which  the  opera- 
tives are  at  once  capitalists  and  workers, 
and  in  which  there  are  no  masters  and  no 
servants? 


WAYS  AND  MEANS  143 

If,  by  what  has  been  said  in  the  foregoing 
pages,  the  importance  and  desirability  of 
such  a  system  as  a  substitute  for  that  of 
wage-capitalism,  and  the  necessity  of  gov- 
ernment aid  in  bringing  it  into  operation, 
have  been  made  clear  to  the  reader,  which 
I  make  bold  to  assume,  it  is  fitting  that  we 
next  proceed  to  consider  the  manner  in 
which  the  government  aid  may  be  made 
available,  together  with  the  question  of  the 
feasibility  of  such  aid  in  the  light  of  prec- 
edents in  the  use  of  government  credit,  and 
of  government  subsidies  in  aid  of  private 
enterprises,  for  the  sake  of  the  public  bene- 
fits expected  to  be  gained  from  such  enter- 
prises. 

It  is  obvious  from  what  has  been  already 
stated,  that  in  order  to  authorize  the  use  of 
government  credit  and  the  power  of  emi- 
nent domain  in  aid  of  the  operatives,  some 
appropriate  action  would  have  to  be  taken 
by  the  law-making  body  of  the  state  or  na- 
tion desiring  to  adopt  and  put  into  opera- 
tion the  scheme  herein  proposed  for  the 
achievement  of  Operative  Ownership.  Such 
legislative  action  should  take  the  form  of  a 
law  authorizing  the  incorporation  of  asso- 
ciations of  operatives  for  the  purpose  of 
taking  over  from  the  owners,  by  purchase 
or  condemnation,  the  establishments  in 


144       OPERATIVE  OWNERSHIP 

which  they  are  employed;  or  of  collectively 
entering  into  arrangements  with  such  own- 
ers for  joint  operation  of  such  establish- 
ments. Such  associations  should  be  given 
the  power  of  eminent  domain,  and  all  other 
powers,  consistent  with  the  public  interests, 
necessary  to  effectuate  the  objects  of  their 
organization.  They  should  have  power  to 
issue  bonds  for  the  purpose  of  paying  for 
the  property  to  be  taken  over,  and  should  be 
required  to  maintain  a  sinking  fund  with 
which  to  meet  the  bonds  at  maturity.  For 
the  payment  of  the  bonds  so  issued  the  gov- 
ernment would  pledge  its  credit,  in  some 
appropriate  form;  having  first  caused  to  be 
made  a  rigid  examination  into  the  condi- 
tion of  the  establishment  to  be  taken  over, 
and  found  it  to  be  prosperous,  somewhat 
after  the  manner  in  which  banking  or  un- 
derwriting concerns  investigate  properties 
which  they  expect  to  finance,  by  bond  issue 
or  otherwise. 

To  safeguard  the  government  against 
loss  by  the  occasional  failure  of  an  es- 
tablishment the  bonds  of  which  had 
been  thus  guaranteed,  an  indemnity  fund 
should  be  provided  to  be  maintained  by  as- 
sessment of  every  guaranteed  establishment 
in  proportion  to  the  amount  of  guaranteed 
bonds  in  force  against  it,  the  rate  of  such 


WAYS  AND  MEANS  145 

assessment  to  be  based  upon  the  known  ra- 
tio of  business  failures  in  the  industry  to 
which  such  establishment  belonged. 
Through  such  a  fund  each  establishment 
would  virtually  and  at  its  own  expense, 
carry  insurance  in  favor  of  the  government, 
against  the  possibility  of  failure,  just  as  it 
carries  insurance  against  loss  by  fire.  Nor 
would  the  maintenance  of  such  a  fund  in- 
volve any  burden  to  the  establishments 
maintaining  it,  for  the  low  rate  of  interest 
at  which  government-secured  bonds  could 
be  marketed  would  more  than  offset  the  cost 
of  maintaining  the  fund  in  question. 

The  more  effectually  to  conserve  the  in- 
terest of  the  government  it  would  probably 
be  expedient  to  establish  a  government  bu- 
reau or  department,  or  a  branch  of  some 
existing  department,  to  have  charge  of  all 
matters  relating  to  Operative  Ownership 
where  the  government  credit  was  involved, 
which  department  should  maintain  a  thor- 
ough system  of  inspection  with  regard  to 
the  financial  and  industrial  conditions  exist- 
ing in  every  establishment  thus  aided,  some- 
what after  the  manner  in  which  state  and 
national  banks  are  inspected.  Such  depart- 
ment should  also  have  power  by  some  ap- 
propriate means,  to  exercise,  whenever  it 
might  be  necessary,  an  effectual  check  upon 


146      OPERATIVE  OWNERSHIP 

any  mismanagement  of  such  establishment, 
and,  in  extreme  cases,  to  take  temporary 
possession  and  assume  management  of  the 
same,  somewhat  after  the  manner  of  re- 
ceivers appointed  by  courts  of  equity. 

EXAMPLES  OF  GOVERNMENT  AID. 

In  the  idea  of  government  aid  to  private- 
ly owned  enterprizes,  given  with  a  view  to 
gaining  some  public  benefit,  there  is  nothing 
new  or  novel.  The  practice  is  centuries  old. 
It  has  at  various  times,  in  different  coun- 
tries, taken  a  diversity  of  forms,  such  as 
subsidies  on  shipping;  bounties  on  exports; 
protective  duties  on  imports;  monopolies; 
grants  of  money  or  land;  and,  in  some  in- 
stances, the  public  credit. 

Perhaps  the  most  interesting,  and  in  con- 
nection with  our  present  subject,  the  most 
suggestive  instance  that  could  be  mentioned 
of  state  aid  to  private  industry,  given  with 
the  design  to  achieve  a  public  benefit,  is  that 
of  the  Irish  Land  Purchase  Acts,  to  which 
reference  was  made  in  the  foregoing  chap- 
ter. These  were  a  series  of  acts  passed 
by  the  British  Parliament  at  various  times 
between  the  years  1885  and  1909,  inclusive, 
providing  for  the  raising  of  money  by  the 
use  of  government  credit  to  enable  the  ten- 
ant farmers  of  Ireland,  which  included  prac- 


WAYS  AND  MEANS  147 

tically  the  entire  farming  population  of  the 
island,  to  buy  at  a  fair  valuation,  the  land 
they  formerly  tilled  as  tenants,  at  oppres- 
sive and  ruinous  rents.  This  aid  was  given 
in  the  form  of  guaranteed  land  stock,  bear- 
ing dividends  of  two  and  three-fourths  per 
cent  to  which  was  added  an  additional  one- 
half  per  cent  for  the  sinking  fund  which 
will  ultimately  wipe  out  the  debt  One  of 
the  series  of  land  acts  above  mentioned — 
that  of  1903,  provided  $800,000,000  for  the 
benefit  of  the  Irish  tenantry  in  addition  to 
some  $200,000,000  which  had  been  made 
available  for  that  purpose  by  previous  acts; 
making  a  total  of  one  thousand  millions  of 
dollars  for  which  the  credit  of  the  British 
government  was  pledged  for  the  purpose 
above  stated.  As  a  result  of  these  acts,  al- 
though less  than  thirteen  years  have  elapsed 
since  the  most  important  act,  that  of  1903, 
was  passed,  upwards  of  550,000  tenant 
farmers  have  been  made  the  owners  of  the 
lands  they  cultivate,  which  compose  much 
the  greater  part  of  the  entire  tillable  area 
of  the  island ;  and  the  process  is  still  going 
on  with  the  practical  certainty  of  the  com- 
plete! abolition  of  landlordism  in  Ireland 
within  a  few  years,  when  every  farmer  will 
own  the  land  he  cultivates. 


148      OPERATIVE  OWNERSHIP 

IRELAND  BEFORE  THE  LAND  PURCHASE  ACTS 
AND  AFTER. 

Prior  to  the  passage  of  the  Land  Purchase 
Acts  practically  all  of  the  land  of  Ireland 
was  owned  by  a  landlord  class  who,  for  the 
most  part,  lived  in  England  or  on  the  Euro- 
pean continent,  where  they  squandered  in 
luxury  the  money  wrested  from  the  tenants 
by  the  most  cruel  system  of  rack-renting 
that  could  be  employed;  so  that  the  great 
majority  of  the  population*  in  years  of  the 
most  bountiful  harvests,  were  scarcely  able 
to  eke  out  a  miserable  existence  with  what 
remained  after  the  demands  of  the  land- 
lords were  satisfied,  while  a  partial  failure 
of  crops,  as  often  happened,  was  followed 
by  suffering  and  often  by  famine,  so  that 
thousands  died  of  starvation. 

In  the  early  Ws  of  the  last  century,  fol- 
lowing one  of  the  recurrent  visitations  of 
famine,  an  agitation  sprung  up  in  Ireland 
for  the  betterment  of  the  condition  of  the 
tenantry,  and  was  carried  on  with  such 
vigor  that  the  country  was  brought  almost 
to  the  verge  of  civil  war.  From  this  agita- 
tion, in  large  measure,  resulted  the  Land 
Purchase  Acts. 

In  1909  Mr.  Hugh  Sutherland,  Associate 
Editor  of  the  Philadelphia  North  American, 
visited  Ireland  for  the  purpose  of  studying 


WAYS  AND  MEANS  149 

the  conditions  there  under  the  operation  of 
the  Land  Acts,  with  a  view  to  publishing  his 
observations  in  the  form  of  a  series  of  let- 
ters to  that  journal.  These  letters  have 
since  been  published  in  book  form,  and 
would  be  interesting  reading  to  any  one  who 
might  desire  to  investigate  the  result  of  the 
change  from  landlordism,  which  is  land  cap- 
italism, to  peasant  proprietorship,  which  is 
Operative  Ownership  applied  to  land.  A 
sentence  or  two  which  I  shall  quote  from 
Mr.  Sutherland's  book  will  enable  the  read- 
er to  form  some  idea  of  the  results  that  have 
been  realized  in  Ireland  through  the  prin- 
ciple of  Operative  Ownership  thus  applied. 

"I  have  traveled,"  writes  Mr.  Sutherland, 
"for  days  and  days  over  the  countryside 
which  I  traversed  seven  years  ago,  and  have 
seen  peace  and  plenty  where  I  saw  misery 
and  despair.  The  face  of  the  land  has  in- 
deed changed,  for  there  are  happy  homes 
and  gardens  where  cattle  grazed,  and  in- 
dustry and  contentment  where  hopeless 
poverty  held  its  ghastly  sway."* 

To  the  lover  of  social  justice  who  reads 
Mr.  Sutherland's  description  of  the  scenes 
above  referred  to,  and  of  which  what  I  have 
quoted  only  affords  the  merest  glance,  the 

^Ireland  Yesterday  and  Today,  by  Hugh  Sutherland,  p. 
126. 


150       OPERATIVE  OWNERSHIP 

thought  will  naturally  occur;  if  the  same 
thing  could  be  done  for  industrial  labor 
throughout  the  world  that  has  been  done 
for  farm  labor  in  Ireland  by  the  means  de- 
scribed— that  of  employing  the  government 
credit  to  help  the  producer  to  become  the 
owner  of  the  means  of  production,  what  a 
blessing  it  would  be  to  society. 

LAND  CAPITALISM  AND  INDUSTRIAL 
CAPITALISM. 

But  why  should  it  not  be  done?  Univer- 
sally evils  of  like  nature  yield  to  like  reme- 
dies. The  trouble  is  essentially  the  same 
in  both  cases — the  land  capitalist  and  the 
industrial  capitalist,  both  non-producers, 
both  owning  and  not  using  the  means  of 
production,  but  subsisting  on  the  labor  of 
those  who  do  use  them.  The  basis  of  the 
claim  of  the  two  kinds  of  capitalists  to  the 
produce  of  labor  in  their  respective  indus- 
tries, is  the  same,  viz.:  the  ownership  of 
the  things  that  labor  works  with  in  the  pro- 
duction of  wealth — land  in  the  one  case,  ma- 
chinery in  the  other.  With  so  many  fea- 
tures in  common  between  the  two  forms  of 
capitalism,  the  conclusion  seems  irresistible 
that  the  remedy  which  proved  to  be  prac- 
ticable and  efficacious  in  the  one  case  would 
be  equally  so  in  the  other— the  principle 


WAYS  AND  MEANS  151 

of  Operative  Ownership  applied  by  the  aid 
of  government  credit. 

GOVERNMENT  AID  IN  THE  UNITED  STATES. 

In  the  minds  of  American  readers  in  par- 
ticular, if  they  are  familiar  with  the  com- 
mercial and  financial  history  of  their  coun- 
try, the  idea  of  government  aid,  whether  in 
the  form  of  credit,  subsidies,  import  duties, 
or  otherwise,  to  privately  owned  enterprises 
for  the  sake  of  the  public  benefits  to  be  de- 
rived therefrom,  should  excite  neither  sur- 
prise nor  alarm.  No  single  subject  has  been 
so  much  discussed  among  the  people  during 
the  past  fifty  years  as,  for  instance,  that  of 
the  protective  tariff,  which  means  an  in- 
direct tax  laid  upon  the  people,  of  every 
class,  in  the  form  of  duties  upon  imports, 
with  the  avowed  purpose  of  aiding  those 
engaged  in  industrial  production  to  the  end 
that,  protected  against  the  competition  of 
foreign  manufactures — the  products  of 
cheaper  labor,  with  lower  standards  of  liv- 
ing— American  industries  might  grow  and 
multiply,  and  the  nation,  as  a  whole,  be 
thereby  benefited.  How  fully  this  object 
has  been  realized  the  marvelous  growth  of 
the  nation,  in  wealth,  in  population,  and  in 
all  the  essentials  of  a  nation's  commercial 
and  industrial  greatness,  abundantly  at- 


152      OPERATIVE  OWNERSHIP 

tests.  The  nation  has  in  this  way  paid  an 
enormous  sum  of  money  to  build  up  its  in- 
dustries. The  amount  paid  indirectly  by 
the  American  people  in  the  form  of  import 
duties,  in  furtherance  of  the  protective 
tariff  policy  since  the  close  of  the  civil  war 
would  more  than  build  and  equip  every 
tariff-protected  mill,  factory  and  workshop 
in  the  United  States;  and  yet  the  people 
seem  very  well  satisfied  with  their  bargain ; 
for  though  they  may  from  time  to  time  re- 
lax the  rigor  with  which  they  adhere  to  the 
policy  of  protection,  they  evince  no  disposi- 
tion to  depart  from  it. 

The  enormous  subsidies  in  the  form  of 
land  grants  given  to  the  railroads  at  various 
times  present  other  instances  of  govern- 
ment aid  to  privately-owned  enterprises 
with  a  view  to  gaining  a  public  benefit.  It 
is  fashionable  in  these  times,  to  denounce  as 
wanton  extravagance,  or  worse,  the  grant- 
ing of  these  subsidies,  and  in  view  of  the 
great  value  to  which  such  lands  have  risen, 
it  would  seem,  looking  at  the  grants  in  ques- 
tion from  the  view  point  of  the  present,  that 
such  criticisms  were  not  unjust.  But  those 
who  were  in  control  of  the  government 
when  those  land  grants  were  made  could  not 
see  them  from  the  view  point  of  the  present. 
To  them  the  land  seemed  to  possess  a  poten- 


WAYS  AND  MEANS  153 

tial  value,  which  could  only  be  realized  by 
means  of  the  railroads.  That  that  view  was 
sound  must  be  apparent  when  we  reflect 
that  then,  as  now,  private  capital  could  not 
otherwise  be  found  for  investment  in  a  rail- 
way through  a  wilderness,  with  no  near 
prospect  of  realizing  a  reasonable  dividend 
on  its  investment.  The  land  grants  resulted 
in  the  rapid  settlement  of  the  territory  tra- 
versed by  the  railways;  and  millions  of 
farms  and  homes  are  now  to  be  seen  where 
formerly  the  wilderness  spread  for  thou- 
sands of  square  miles.  Year  after  year  that 
erstwhile  wilderness  adds  to  the  nation's 
wealth  a  sum  that  may  be  reckoned  in  hun- 
dreds of  millions,  and  to  the  world's  food 
supply,  in  excess  of  the  nation's  own  needs, 
enough  to  feed  a  considerable  portion  of  the 
population  of  Europe.  Compared  to  results 
like  these  the  question  whether  or  not,  in 
some  remote  time  in  the  future,  the  wilder- 
ness would  not  have  been  settled  anyway; 
or  whether  or  not  a  better  bargain  might 
have  been  driven  with  the  railway  promo- 
ters, and  a  lesser  quantity  of  land  have  suf- 
ficed to  procure  the  building  of  the  rail- 
ways, is  of  very  little  importance.  The  les- 
son afforded  by  the  story  of  the  land  grants 
lies  in  the  fact  that  the  grants  were  made  to 
privately  owned  enterprises  in  the  expecta- 


154      OPERATIVE  OWNERSHIP 

tion  of  realizing  a  public  benefit;  and  that 
that  benefit  was  realized  beyond  the  most 
sanguine  hopes  of  those  governmental  agen- 
cies through  which  the  grants  were  made. 

In  some  cases  in  the  United  States  the 
government  aid  to  privately  owned  enter- 
prises for  public  benefit  took  the  form,  in 
whole  or  in  part,  of  government  credit. 
Thus,  in  addition  to  grants  of  lands  made 
by  the  government  to  the  Union  Pacific  Rail- 
way Company  in  1862,  the  government  of 
the  United  States  pledged  its  credit  on  the 
bonds  of  that  company  to  the  extent,  on  an 
average,  of  $25,000  per  mile  of  railway  to 
be  built— considerably  more  than  one-half 
the  cost  of  construction  and  equipment.  In 
consequence  of  this  obligation  the  govern- 
ment paid  out  at  various  times  something 
over  $100,000,000,  every  dollar  of  which  was 
afterwards  recovered  with  interest.  Thus 
in  the  class  of  cases  last  mentioned,  the  pub- 
lic benefits  derived  from  the  enterprises  in 
question  are  due  in  part  to  this  pledging  of 
government  credit,  and  the  expected  public 
benefits  were  realized  without  loss  to  the 
government. 

Similar  instances  of  government  aid 
granted  in  the  form  of  subsidies  of  land, 
bounties  on  exports  or  duties  on  imports; 
pledges  of  government  credit;  and  such  like 


WAYS  AND  MEANS  155 

benefits,  in  many  different  countries,  to  pri- 
vately owned  enterprises,  for  the  sake  of 
the  public  benefit  to  be  derived  from  the 
enterprises  thereby  aided,  and  which  have 
nearly  always  resulted  in  the  attainment  of 
the  public  benefit  desired,  might  be  multi- 
plied indefinitely. 

EXAMPLE  OF  INDEMNITY  TO  GOVERNMENT  IK 
GUARANTY  OF  BANK  DEPOSITS. 

In  this  connection  mention  may  appropri- 
ately be  made  of  the  scheme  for  guarantee- 
ing bank  deposits  recently  proposed  and  in 
part  carried  out  in  the  United  States. 

Following  the  financial  panic  of  1907, 
William  J.  Bryan,  one  of  the  leading  pub- 
licists and  statesmen  in  the  United  States 
and  recently  Secretary  of  State  in  the  cabi- 
net of  President  Wilson,  proposed,  and 
strongly  advocated  in  The  Commoner,  a 
weekly  journal  then  owned  and  edited  by 
him,  that,  to  prevent  a  recurrence  of  such 
panics,  which  nearly  always  occur  through 
sudden  and  generally  groundless  fears  on 
the  part  of  depositors  in  banks,  the  repay- 
ment of  deposits  in  National  banks  should 
be  guaranteed  by  the  government,  and  that 
a  fund  be  established  by  means  of  a  small 
assessment  against  each  bank,  based  upon 
the  amount  of  its  average  deposits,  out  of 


156      OPERATIVE  OWNERSHIP 

which  fund  depositors  should  be  paid, 
promptly  and  in  full,  in  the  event  of  failure 
of  any  such  bank.  Largely  through  Mr. 
Bryan's  influence  the  plan  was  adopted  and 
incorporated  into  the  national  Democratic 
platform  of  1908,  and  at  the  presidential 
election  of  that  year  6,393,000  voters  gave 
it  their  approval.  The  Democratic  party 
was  defeated,  however,  and  with  it,  for  the 
time  being,  the  plan  of  government  guar- 
anty of  bank  deposits.  The  plan,  was,  how- 
ever, adopted  and  enacted  into  law  by  the 
States  of  Kansas,  Oklahoma,  Nebraska, 
Texas  and  South  Dakota,  and  it  is  now  in 
successful  operation  in  four  of  those  states. 
In  South  Dakota  the  law  was  so  framed  that 
the  bankers  are  not  compelled  to  operate 
under  it,  and  they  have  not  done  so.  That 
the  plan  is  not  a  partisan  one  is  evidenced 
by  the  fact  that  of  the  states  above  named 
as  having  adopted  it,  two  are  Democratic 
and  three  Republican. 

In  proof  of  the  success  of  the  system  of 
guaranty  of  bank  deposits  the  following 
quotation  is  made  from  a  letter  by  George 
H.  Shibley,  Director  of  the  American  Bu- 
reau of  Political  Research,  transmitting  to 
the  United  States  Senate  Sub-committee  on 
Guaranty  of  Bank  Deposits  a  brief  history 
of  the  system  in  the  states  above  mentioned. 


WAYS  AND  MEANS  157 

Commenting  on  the  results  of  the  system 
Mr.  Shibley  says: 

"This  record  shows  that  not  only  are  the 
people  of  these  states  greatly  pleased  with 
the  new  departure — a  total  absence  of  per- 
sonal loss  from  closed  banks — but  also  that 
the  banks  themselves  that  have  been  guar- 
anteeing bank  deposits  have  profited  by 
the  system,  owing  to  the  advantages  secured 
by  the  increase  in  the  volume  of  their  de- 
posits, and  other  benefits.  This  is  of  vast 
importance,  demonstrating  that  the  system 
as  a  whole  is  a  complete  success." 

Not  one  dollar  has  any  one  of  the  states 
which  have  adopted  this  system  been  called 
upon  to  pay  out  of  its  own  revenue,  nor  is 
it  even  remotely  probable  that  they  ever 
will  be,  for  they  are  amply  protected  against 
possible  loss  by  the  guaranty  fund  before 
mentioned. 

SAFETY  THROUGH  INDEMNITY  FUND. 

The  scheme  of  government  guaranty  of 
bank  deposits  is  of  interest  in  this  connec- 
tion not  alone  as  affording  a  recent  instance 
of  the  use  of  the  government  credit  for  the 
direct  benefit  of  one  class  of  the  community 
with  a  view  to  securing  indirectly  a  benefit 
to  the  whole  community,  but  also  for  the 
unique  feature  of  an  indemnity  fund,  main- 


158       OPERATIVE  OWNERSHIP 

tained  at  the  expense  of  the  class  receiving 
the  benefit  of  the  government  credit,  and 
having  the  effect  of  making  the  government 
secure  against  any  practical  possibility  of 
loss  by  failure  of  any  such  establishment. 
The  same  feature,  as  stated  in  an  earlier 
paragraph  of  this  chapter,  has  been  adopted 
as  a  part  of  the  plan  herein  proposed  for 
the  use  of  government  credit  in  aid  of 
Operative  Ownership;  and  there  is  no  rea- 
son to  doubt  that  it  will  produce  the  same 
result,  of  protecting  the  government  against 
loss,  as  in  the  case  of  guaranty  of  bank  de- 
posits in  the  states  above  mentioned. 

Although  the  adoption  of  the  system  of 
guaranty  of  bank  deposits  would  involve 
the  government  credit  to  a  vastly  greater 
extent  than  would  the  scheme  herein  pro- 
posed for  the  establishment  of  Operative 
Ownership,  it  will  readily  be  seen  that  the 
latter  would  be  immeasurably  more  bene- 
ficial and  far-reaching  in  its  results,  since 
it  would  effect  a  complete  transformation 
of  the  social  and  economic  status  of  the 
wage-earning  classes,  which  constitute  so 
large  and  important  a  part  of  the  popula- 
tion, changing  them  from  the  condition  of 
servants  or  employees  of  capitalists,  to  that 
of  free  and  independent  workers  and  own- 


WAYS  AND  MEANS  159 

ers  of  the  capital,  in  the  form  of  machinery 
and  materials  with  which  they  worked. 

If  we  roughly  estimate  the  wage-earning 
population,  including  under  that  head  brain- 
workers  as  well  as  hand-workers,  employed 
in  the  various  industries  to  which  the 
scheme  herein  proposed  may  be  applied,  in 
the  United  States,  at  15,000,000,  or  approxi- 
mately one-half  of  the  total  wage-earning 
population;  and  if  we  estimate  the  number 
of  persons  dependent  upon  each  wage-earn- 
er as  three,  including  the  wage-earner  him- 
self, a  very  conservative  estimate,  we  have 
a  total  of  45,000,000  persons  who  would  be  - 
directly  affected  by  the  system  of  Operative 
Ownership.  If  to  this  number  there  be  ad- 
ded those  engaged  in  mercantile,  profes- 
sional and  such  like  occupations,  who  de- 
pend in  very  large  measure  upon  the  wage 
earning  classes  for  their  subsistence,  and 
who  with  their  dependents  may  be  roughly 
estimated  at  an  additional  10,000,000,  we 
shall  have  considerably  more  than  one-half 
of  the  population  of  the  country  who  would 
be  more  or  less  directly  and  beneficially  af- 
fected by  the  change  which  Operative  Own- 
ership would  make  in  the  social  status  of 
the  working  classes.  So  inter-related  are 
the  various  classes  that  compose  society  in 
the  mass,  that  whatever  affects  so  large  a 


160       OPERATIVE  OWNERSHIP 

proportion  of  the  population  advantageous- 
ly, cannot  but  affect  practically  all  the  rest 
in  the  same  manner,  in  varying  degrees. 

When  so  large  a  part  of  the  population  of 
the  country  are  directly  concerned;  and 
when  the  beneficial  results,  which  are  rea- 
sonably certain  to  flow  from  the  general 
adoption  of  the  system  of  Operative  Owner- 
ship, affect  this  part  so  vitally,  it  would 
seem  that  the  pledging  of  the  government 
credit  under  safeguards  which  amount  to 
an  insurance  against  loss,  and  which  in 
effect  is  only  a  pledging  of  the  credit  of  all 
the  people,  upon  good  security,  for  the  di- 
rect benefit  of  half  the  people,  and  the  in- 
direct benefit  of  the  other  half,  would  be 
a  very  small  price  to  pay  for  such  great 
benefits. 

LITTLE  RISK  AND  GREAT  BENEFITS. 

But  even  if  we  may  suppose  that  the  gov- 
ernment were  not  fully  protected  against 
loss  in  the  relatively  small  number  of  cases 
(as  we  shall  presently  see)  in  which  it  would 
be  necessary  to  resort  to  the  use  of  govern- 
ment credit;  and  if  we  assume  that  the 
same  percentage  of  failures  should  continue 
to  occur  in  the  guaranteed  establishments 
which  now  annually  occur  in  manufactur- 
ing establishments  generally  of  the  class 


WAYS  AND  MEANS  161 

which  would  be  considered  acceptable  risks 
by  the  government  (and  which  failures  may 
be  roughly  estimated  as  involving  one-half 
of  one  per  cent  of  the  capital  represented  in 
all  such  establishments),  the  loss  which  the 
government  would  thereby  sustain  would  be 
an  insignificant  price  to  pay  for  the  benefits 
to  be  derived  to  society,  by  ending  the  war 
of  the  classes  and  by  the  establishment  of 
the  industrial  relations  of  the  nation  upon 
a  permanent  basis  of  social  justice,  to  say 
nothing  of  the  special  benefits  to  be  realized 
from  the  establishment  of  such  a  system, 
by  the  laboring  classes  for  whose  direct 
benefit  the  government  has  hitherto  done 
practically  nothing. 

CONSIDER  THE  WORKINGMAN. 

The  people  have  been  taxed  enormously 
in  the  form  of  protective  tariff  duties,  and 
capitalist  manufacturers  have  heaped  up 
prodigious  fortunes  as  one  of  the  results. 
The  national  and  state  governments  pay 
out,  year  after  year,  millions  upon  millions 
of  dollars  for  the  establishment  and  main- 
tenance of  agricultural  colleges,  agricultural 
experiment  stations,  and  agricultural  what- 
nots, and  the  agricultural  classes  have 
waxed  rich  as  the  result,  in  part,  of  such 
governmental  aids.  Doctors,  lawyers,  edu- 


162      OPERATIVE  OWNERSHIP 

cators,  engineers,  and  other  professional 
gentlemen,  are  educated  in  state  universi- 
ties maintained  at  public  expense ;  but  noth- 
ing is  done — that  involves  any  outlay  of 
money  by  the  government — for  the  labor- 
ing classes.  Laws  and  regulations  have  been 
passed,  it  is  true,  affecting  the  conditions  of 
labor  and  the  relations  between  the  laborer 
and  his  employer;  but  these  are  cheap  in 
the  sense  that  they  cost  the  government 
nothing,  for  the  cost  is  borne  by  the  em- 
ployer. 

The  man  who  started  as  a  tariff  protected 
manufacturer  a  generation  ago,  in  a  small 
way,  if  qualified  for  his  chosen  vocation, 
and  if  he  has  met  with  average  success,  has 
lived  well,  and  has  retired,  or  is  able  to  re- 
tire, in  opulence.  The  man  who  started  a 
generation  ago,  in  a  small  way,  as  a  tariff- 
protected  farmer,  if  he  has  attended  with 
reasonable  industry  and  diligence  to  his  bus- 
iness, and  has  met  with  average  success,  has 
lived  well  and  has  retired,  or  is  able  to  re- 
tire, in  comfort  and  affluence,  and  to  trans- 
mit to  his  children  a  comfortable  fortune. 
But  the  man  who  started  a  generation  ago 
as  a  tradesman,  or  as  a  mill  or  factory  oper- 
ative, however  skillful  and  industrious  he 
may  have  been,  is  still  a  tradesman  or  a  mill 
or  factory  operative ;  and  if  he  has  had  but 


WAYS  AND  MEANS  163 

average  success,  he  has  not  lived  well,  but 
has  had  a  constant  struggle  with  poverty, 
privation,  want,  often  hunger,  always  un- 
certainty, and  often  worry  as  to  his  next 
month's  or  next  year's  subsistence,  and  is 
ready  to  retire,  if  indeed  he  has  not  already 
retired,  a  useless,  broken  down,  decrepit  old 
man,  dependent  on  the  filial  duty  of  his  chil- 
dren— if  happily  he  has  any  children  who 
recognize  the  duty— or  is  fit  only  for  the 
poorhouse  or  the  grave. 

I  said,  in  the  last  paragraph  but  two,  that 
the  government  has  done  nothing  that  in- 
volves an  outlay  of  money  for  the  benefit 
of  the  laboring  classes,  but  that  is  not 
strictly  correct.  It  has  provided  soup-houses 
and  bread  lines  for  their  times  of  unemploy- 
ment; and  for  the  old  age  of  every  worker 
who  needs  it— and  very  many  do — it  has 
provided  a  very  imposing  poorhouse,  and 
a  very  hospitable  grave — in  the  potter's 
field. 

It  is  not  contemplated  that  the  govern- 
ment would  lend  its  credit  for  the  taking 
over  by  the  operatives  of  any  establishment 
unless,  after  a  rigid  investigation  such  as 
would  be  made  today  by  a  banking  house 
or  underwriting  syndicate,  preparatory  to 
the  flotation  of  a  bond  issue,  such  establish- 
ment was  found  to  be  in  a  prosperous  con- 


164       OPERATIVE  OWNERSHIP 

dition,  and  reasonably  certain  of  so  contin- 
uing. The  same  conditions  which  would 
make  such  an  establishment  acceptable  to 
the  government  for  the  purpose  above  men- 
tioned would  also  make  it  desirable  to  the 
owners  to  retain,  even  on  condition  of  con- 
senting to  an  arrangement  for  joint  opera- 
tion, and  ultimate  joint  ownership,  with 
the  operatives.  It  is  therefore  practi- 
cally certain  that  the  number  of  capital- 
ists who  would  suffer  themselves  to  be 
expropriated  rather  than  submit  to  such  an 
arrangement  would  be  very  small.  It  may 
well  be  believed  that  a  capitalist  compelled 
to  choose  between  giving  up  a  profitable 
business  which  will  yield  good  returns  for 
his  capital,  with  a  liberal  salary  for  his 
skill  as  manager,  should  he  choose  to  act 
in  such  capacity,  and  the  alternative  of  en- 
tering into  such  arrangements  as  above  pro- 
posed, would  not  hesitate  to  choose  that  al- 
ternative. 

GOVERNMENT  CREDIT  TO  BE  SELDOM  USED. 

In  the  expropriation  of  the  landlords  of 
Ireland  by  the  aid  of  government  credit,  un- 
der the  Land  Purchase  Acts,  which  has  been 
mentioned  in  the  foregoing  pages,  there 
was  made  available  for  the  benefit  of  the 
Irish  tenantry,  a  total  of  approximately  one 


WAYS  AND  MEANS  165 

billion  dollars.  The  land,  primarily,  and  af- 
ter that,  all  the  fiscal  resources  of  Ireland, 
were  made  security  against  loss  to  the 
United  Kingdom,  whose  parliament  passed 
the  acts  in  question.  This  would  make  a 
per  capita  liability  for  the  whole  population 
of  Ireland  of  approximately  $250. 

It  is  improbable  that  the  capitalists  in  the 
United  States  who  would  choose  expropria- 
tion rather  than  joint  operation,  under  the 
plan  herein  proposed  would  represent,  in 
the  aggregate  of  capital  involved,  more 
than  the  amount  which  was  made  available 
to  the  Irish  tenants  as  above  stated;  for 
in  their  case  there  was  no  alternative  plan 
of  joint  operation  and  joint  ownership  pos- 
sible. The  landlord  must  either  sell  the  land 
or  hold  it,  taking  the  chance,  in  the  latter 
event,  of  compulsory  sale  on  less  favorable 
terms  at  some  future  time.  If  we  assume 
that  the  capitalists  who  might  prefer  expro- 
priation would  represent  the  aggregate 
amount  of  capital  above  stated,  it  would 
make  a  per  capita  liability  of  only  $10.00  for 
the  total  population  of  the  United  States. 

The  total  amount  of  capital  employed  in 
the  United  States  in  its  three  leading 
branches  of  industry,  manufacturing,  min- 
ing and  railway  transportation,  according 
to  estimates  based  upon  census  reports  for 


166      OPERATIVE  OWNERSHIP 

the  year  1910  and  other  official  sources,  was 
approximately  $40,000,000,000.  If  from  this 
total  we  deduct  one-fourth,  as  covering  the 
capital  invested  in  enterprises  which,  for 
various  reasons,  such  as  smallness  of  estab- 
lishments, unsatisfactory  financial  condi- 
tion, or  the  satisfactory  nature  of  the  re- 
lations already  existing  between  capital  and 
labor  in  such  establishments,  would  not 
come  within  the  operation  of  the  plan  pro- 
posed, there  would  remain  a  total  of 
$30,000,000,000,  employed  in  establishments 
the  operatives  in  which  might  be  desirous 
of  coming,  and  eligible  to  come,  under  the 
operation  of  the  plan  proposed.  In  order 
that  the  aggregate  amount  to  which  gov- 
ernment credit  would  be  used  might  amount 
to  the  sum  above  mentioned,  of  $1,000,000,- 
000,  or  $10.00  per  capita  of  the  population, 
there  would  have  to  be  one  concern  in  ev- 
ery thirty  of  those  in  a  sound  financial  con- 
dition and  doing  a  profitable  business,  who 
would  prefer  going  out  of  business,  and 
turning  it  over  to  the  operatives,  rather 
than  enter  into  arrangements  with  the  lat- 
ter for  joint  operation  and  ultimately  joint 
ownership,  as  herein  proposed. 

It  is  not  reasonably  supposable  that  so 
large  a  proportion  of  capitalists,  who  as  a 
class  have  a  very  high  appreciation  of  the 


WAYS  AND  MEANS  167 

earning  power  of  capital,  and  of  an  oppor- 
tunity for  its  safe  and  profitable  invest- 
ment, would  be  willing  to  put  themselves 
in  a  class  with  the  proverbial  individual  who 
"cut  off  his  nose  to  spite  his  face."  Yet  if 
we  suppose  that  so  large  a  proportion  of 
capitalists  as  above  stated  were  willing  to 
enter  the  class  of  the  spiteful  party  above 
mentioned,  and  if  we  further  suppose  the 
per  capita  liability  above  mentioned,  to 
eventuate  in  a  total  loss,  instead  of  the 
mere  shadowy  possibility  of  loss  that  it 
really  would  be,  it  would  still  be  an  insig- 
nificant price  to  pay  for  the  benefits  which 
would  result,  directly  to  a  very  large  per- 
centage of  the  population,  and  indirectly 
to  the  State  and  to  society  in  general. 

AN  EQUITABLE  BASIS  OF  DIVISION. 

Frequent  use  has  been  made  in  the  fore- 
going pages  of  the  term  "equitable  basis" 
and  others  of  like  import,  in  speaking  of  an 
apportionment,  between  capitalists  and  op- 
eratives, of  the  profits  of  their  joint  opera- 
tions, and  the  question  has  doubtless  arisen 
in  the  mind  of  the  reader:  what  would  be 
considered  an  "equitable  basis"  for  such  an 
apportionment?  As  the  same  term  will  be 
used  again  and  again,  it  is  desirable  that 
it  be  clearly  understood. 


168       OPERATIVE  OWNERSHIP 

At  first  blush  the  question,  what  is  an 
equitable  division  of  products  or  profits, 
would  seem  to  be  a  perplexing  one.  It  will 
not  prove  so,  however,  if  we  approach  its 
consideration  with  the  idea  of  power,  as  a 
factor  in  its  determination,  banished  from 
our  minds;  so  that  we  may  regard  both  the 
capitalists  and  the  operatives  as  equally 
free  and  independent  parties,  mutually 
agreeing  to  combine  their  resources  of  cap- 
ital and  labor  power  respectively,  in  pro- 
ductive operations.  Under  such  an  arrange- 
ment it  would  seem  but  natural  justice  that 
each  should  share  in  the  profits  of  their 
joint  operations  in  proportion  to  the  value 
of  the  thing  which  each  had  contributed 
towards  its  production.  An  illustration  may 
serve  to  make  this  idea  more  clear. 

Suppose  A  to  be  the  owner  of  a  city  lot 
which  lies  idle  and  profitless  because  he  has 
not  the  means  with  which  to  build  on  it. 
B  has  a  sum  of  money  which  lies  idle  for 
lack  of  an  opportunity  to  invest  it.  A  and 
B  mutually  agree  to  build  a  house  on  A's 
lot  with  B's  money,  and  do  so  accordingly. 
The  transaction  is  not  regarded  as  a  sale 
on  the  one  side  nor  a  loan  on  the  other,  but 
as  a  joint  investment.  Now  the  property 
is  rented  and  A  and  B  come  to  divide  the 
first  year's  income.  The  value  of  A's  lot 


WAYS  AND  MEANS  169 

was  $3,000;  the  cost  of  the  building  for 
which  B  furnished  the  money  was  $5,000. 
The  income  to  be  divided  amounted  to  $800. 
The  value  of  A's  lot  being  three-eighths  of 
the  total  cost  of  house  and  lot,  and  the 
amount  of  money  contributed  by  B  being 
five-eighths  of  the  total  cost,  it  is  obvious 
that  both  should  share  in  the  profits  or  in- 
come in  the  same  proportions,  that  is  to 
say:  A  should  receive  three-eighths  and 
B  five-eighths  of  the  income,  or  $300  and 
$500,  respectively. 

Let  us  apply  the  same  method  of  division 
to  an  arrangement  for  joint  operation  such 
as  has  been  suggested  between  capitalists 
and  operatives.  Suppose  the  owner  of  a 
manufacturing  plant  with  an  investment  of 
$500,000,  employing  200  operatives,  has  en- 
tered into  an  agreement  with  the  latter 
somewhat  as  above  outlined  in  the  case  of 
A  and  B,  and  that  at  the  end  of  the  fiscal 
year  it  is  found  after  paying  all  operating 
expenses,  including  depreciation  of  plant, 
wages  of  operatives  to  the  amount  of 
$100,000,  and  interest  on  capital  at  six 
per  cent,  $30,000,  there  would  remain  as 
net  profits  $120,000,  which  is  to  be  divided 
between  the  capitalist  and  the  operatives. 

Many  will  say,  that  under  the  rule  that 
each  must  participate  in  the  profits  in  pro- 


170       OPERATIVE  OWNERSHIP 

portion  to  the  value  of  what  they  have  re- 
spectively contributed,  and  the  owner  hav- 
ing contributed  his  capital  of  $500,000,  and 
the  operatives  $100,000  in  wages,  which  con- 
tributions, added  together  would  make 
$600,000,  the  owner  should  receive  five- 
sixths  of  the  profits  and  the  operatives  one- 
sixth.  Certain  profit-sharing  concerns  ac- 
tually divide  their  profits  on  that  basis,  be- 
lieving it  to  be  a  just  ratio,  but  it  is  funda- 
mentally wrong. 

The  error  in  the  computation  lies  in  the 
assumption  that  the  owner  has  contributed 
his  capital,  whereas,  in  reality,  he  has  only 
contributed  the  use  of  Ms  capital.  The  sub- 
stance of  it  remains  intact  His  plant,  stock 
in  trade,  etc.,  are  unimpaired,  for  the  wear 
and  tear  of  the  plant  are  covered  by  the 
items  of  repairs,  depreciation,  etc.,  and  any 
diminution  of  stock  is  represented  in  the 
item  of  profits.  The  old  adage  that  one 
"cannot  have  his  loaf  and  eat  it,  too"  is 
and  will  always  be,  true ;  whence  it  follows 
that  if  the  owner  has  his  loaf  at  the  end 
of  the  year  it  is  certain  it  has  not  been 
eaten;  that  is  to  say,  if  he  has  his  plant 
and  his  stock  in  trade  intact,  at  the  end  of 
the  year,  it  is  certain  they  have  not  gone 
into  the  year's  business. 

Not  so,  however,  as  to  the  labor  of  the 


WAYS  AND  ME  Aft  6  171 

operatives.  That  has  been  expended  and  is 
irretrievably  gone.  A  definite  part  of  the 
span  of  life  that  remained  to  each  oper- 
ative at  the  beginning  of  the  year  has  gone 
into,  and  is  materialized  in,  the  product 
of  the  industrial  operations.  What  part, 
he  may  not  know — but  that  it  is  gone  ad- 
mits of  no  doubt;  and,  unlike  the  capital 
of  the  owner,  does  not  remain  unimpaired 
at  the  end  of  the  year. 

The  true  basis  of  computation  in  such 
a  case  as  that  above  supposed  would  seem 
to  be,  for  the  capitalist  the  current  rate  of 
interest  at  the  time  and  place  of  the  trans- 
action, as  the  value  of  the  use  of  the  cap- 
ital contributed  by  him,  and  for  the  oper- 
atives the  current  rate  of  wages,  as  the 
value  of  the  labor  contributed  by  them,  the 
profits  in  excess  of  these  items  to  be  divided 
between  the  capitalist  and  the  operatives 
in  the  proportion  which  the  value  of  the 
use  of  the  capital  would  bear  to  the  value 
of  the  labor  expended.  It  has,  however,  been 
urged  that  the  rate  of  interest  paid  for 
money  loaned  upon  good  security  is  not  a 
true  measure  of  the  value  of  the  use  of 
money  invested  in  industrial  production, 
since  in  the  latter  form  of  investment  there 
is  no  security  against  loss,  the  danger  of 
which  is  aifected  by  many  factors  not 


172       OPERATIVE  OWNERSHIP 

within  the  control  of  the  capitalist,  and  the 
risk  of  which  varies  in  different  lines  of 
business. 

It  must  be  admitted  that  where  the  dan- 
ger of  loss  is  greater  in  a  given  industry 
than  when  money  is  loaned  upon  good 
security,  the  rate  of  interest  should  be 
enough  higher  to  cover  the  additional 
risk;  and  as  there  is  no  certain  rule  by 
which  the  element  of  risk  may  be  accurate- 
ly measured,  the  rate  to  be  paid  to  the  cap- 
italist as  the  value  of  the  use  of  his  cap- 
ital, before  the  profits  could  be  divided, 
would  be  a  matter  of  mutual  agreement 
in  each  case. 

The  correct  apportionment  of  the  profits 
in  the  case  above  supposed  would  require, 
on  the  assumed  basis,  that  the  capitalist  who 
has  contributed  the  use  of  his  capital,  worth 
thirty  thousand  dollars,  or  23  per  cent,  of 
the  combined  contributions  of  capital  and 
labor,  should  receive  23  per  cent,  of  the 
profits  in  addition  to  interest;  and  that  la- 
bor, whose  contribution  was  77  per  cent, 
of  the  combined  contributions,  should  re- 
ceive 77  per  cent  of  the  profits,  in  addition 
to  wages. 

It  is  conceivable  that  in  some  years,  ow- 
ing to  certain  extraordinary  conditions  of 
the  market  for  certain  commodities,  or  of 


WAYS  AND  MEANS  173 

business  generally,  there  might  be  no  profits 
to  divide  after  allowing  the  agreed  rate 
of  interest  to  the  capitalist  and  the  current 
rate  of  wages  to  the  operatives;  on  the 
contrary,  it  is  possible  that  in  such  condi- 
tions of  the  market  or  of  business  a  loss 
might  result.  In  such  event  the  loss  should 
be  borne  by  both  parties  jointly,  and  in 
the  same  proportion  that  they  would  have 
participated  in  the  profits.  It  would  be  most 
unjust  to  require  the  capitalist  to  bear  all 
the  loss,  if  the  business  were  unsuccessful, 
but  only  to  receive  a  part  of  the  profits  if 
it  were  successful. 

In  the  principle  that  capital  and  labor 
should  share  in  the  products  or  profits  of 
their  joint  operations  in  proportion  to  the 
value  of  what  each  has  contributed  thereto, 
we  have  a  standard  based  upon  absolute 
justice,  by  which  the  share  of  each  in  the 
joint  product  may  be  determined  with  an 
approach  to  mathematical  accuracy.  The 
value  of  the  use  of  capital,  the  current  rate 
of  interest  at  a  given  time  and  place,  is 
almost  as  easily  ascertainable  as  is  the  mar- 
ket price  of  wheat.  The  value  of  labor,  the 
prevailing  standard  rate  of  wages  in  a 
given  locality  for  any  trade  or  class  of  la- 
bor, is  almost  as  easily  ascertained.  From 
these  data  the  share  of  each  is  a  matter 


174       OPERATIVE  OWNERSHIP 

of  easy  computation,  with  little  room  for 
disagreement  or  dispute. 

In  the  principle  that  capital  and  labor 
should  share  equally  in  the  management  of 
their  joint  enterprise,  and  in  the  profits  in 
proportion  to  what  each  has  contributed  to 
their  production,  while  the  losses,  if  losses 
result,  should  be  borne  in  the  same  propor- 
tion, we  have  all  the  elements  of  a  true 
copartnership — joint  control,  joint  profits 
and  joint  losses — and  that  would  be  the  true 
character  of  the  relations  between  capital- 
ists and  operatives  in  the  first  stage  of  the 
system  proposed — that  of  joint  operation. 

From  what  has  been  shown  in  the  fore- 
going pages  of  this  chapter,  I  believe  it 
may  fairly  be  concluded:  (1)  that  the  ex- 
ercise of  the  power  of  eminent  domain,  in 
the  manner  and  for  the  purpose  contem- 
plated, involves  no  violation  of  the  rights 
of  private  property;  (2)  that  the  use  of 
government  credit,  in  the  manner  proposed, 
involves  no  practical  possibility  of  loss  to 
the  government,  and  is  altogether  feasible ; 
and  (3)  that  with  the  government  aid  made 
available  for  the  benefit  of  industrial  work- 
ers in  the  manner  above  explained,  its  ac- 
tual use  would  be  seldom  required,  for  the 
great  bulk  of  capitalist  employers  would 
gladly  enter  into  arrangements  with  their 


WAYS  AND  MEANS  175 

operatives  for  joint  operation  of  their  es- 
tablishments, upon  an  equitable  basis,  in 
preference  to  going  out  of  business  alto- 
gether. 

INTRODUCING  THE  SYSTEM. 

There  remains,  therefore,  to  be  explained 
the  contemplated  plan  for  the  introduction 
of  the  proposed  system  of  participation,  to 
which  frequent  reference  has  been  made  in 
the  foregoing  pages,  by  means  of  which  the 
industrial  tool-users  may  hope  to  become, 
first  copartners  with  the  capitalist  owners, 
then  joint  owners,  and  ultimately  sole  own- 
ers, of  the  means  of  industrial  production. 

Assuming  that  a  law  had  been  enacted 
authorizing  the  formation  of  associations 
of  operatives,  in  corporate  form,  with  the 
powers  and  for  the  purposes  already  ex- 
plained, the  first  step  to  be  taken  by  the 
operatives  in  any  establishment  desiring  to 
avail  themselves  of  the  benefits  of  the  law, 
would  be  to  organize  themselves  into  a  cor- 
porate body,  in  such  manner  as  the  law 
should  provide. 

Corporate  organization  being  effected, 
the  Operatives'  Association  would  submit  to 
the  employers  a  proposition  for  joint  oper- 
ation by  the  owners  and  themselves,  pro- 
viding for  joint  participation  in  the  man- 


176       OPERATIVE  OWNERSHIP 

agement  upon  a  stipulated  basis  of  repre- 
sentation; joint  participation  in  the  profits 
upon  an  equitable  basis  of  division  as  be- 
tween the  employers  and  the  operatives, 
and  the  right  of  the  operatives  collectively 
to  purchase  from  time  to  time,  or  at  an 
agreed  time  in  the  future,  at  a  stipulated 
price  or  upon  a  definite  basis  of  valuation, 
a  half  interest  in  the  establishment.  Should 
the  employers  refuse  to  consider  any  such 
proposition,  the  operatives  would  have  re- 
course to  eminent  domain  to  take  over  the 
establishment  in  the  manner  already  ex- 
plained. But  should  the  employer  be  willing 
to  enter  into  the  arrangements  proposed, 
or  into  negotiations  for  more  satisfactory 
arrangements,  such  negotiations  might  bfe 
carried  on  either  directly  between  the  par- 
ties in  interest,  or  through  the  mediation, 
and  with  the  aid  of,  the  government  depart- 
ment or  agency  having  such  matters  in 
charge.  Should  the  negotiations  fail 
through  the  refusal  of  the  employers  to 
agree  to  terms  which,  in  the  opinion  of 
the  government  department  or  agency 
above  mentioned,  were  just  and  reasonable, 
resort  might  be  had  to  eminent  domain,  as 
in  the  case  of  the  employers'  refusal  to  con- 
sider any  proposition  in  the  first  instance. 
But  should  the  negotiations  fail  through  un- 


WAYS  AND  MEANS  177 

reasonable  demands  on  the  part  of  the  op- 
eratives, the  further  aid  of  the  government 
would  be  denied  them. 

If  the  proposition  submitted  to  the  em- 
ployers by  the  operatives  should  be  accept- 
able; or  if  a  mutually  acceptable  proposi- 
tion should  be  agreed  upon  through  nego- 
tiations, which  proposition  in  either  event, 
complied  with  the  requirements  of  the  law, 
a  contract  embodying  such  proposition 
would  be  formally  entered  into  and  would 
be  thereafter  binding  upon  both  parties 
thereto. 

CONSERVING  THE  PUBLIC  INTERESTS. 

Only  the  advancement  of  the  public  in- 
terests would  warrant  the  government  in 
placing  at  the  service  of  the  operatives  the 
extraordinary  powers  involved  in  the  plan 
under  consideration.  But  these  interests 
would  be  but  slightly  subserved  if  the  only 
result  of  the  arrangements  above  proposed, 
between  employers  and  operatives,  were  a 
larger  income  for  the  operatives,  in  such 
form  that  it  might  all  be  immediately  ex- 
pended by  them  in  gratifying  the  desire 
for  better  living  in  the  present,  without  pro- 
vision for  the  future ;  leaving  them,  in  many 
cases,  a  prey  to  their  own  improvidence, 
and  a  possible  burden  to  the  public,  if  later 


178       OPERATIVE  OWNERSHIP 

they  should  be  overtaken  by  the  calamities 
of  unemployment,  sickness  or  a  dependent 
old  age.  In  lending  its  aid  to  the  establish- 
ment of  the  relations  between  capitalists 
and  operatives  herein  proposed,  the  objects 
which  might  be  supposed  to  be  in  contem- 
plation by  the  government  would  be,  not 
alone  the  immediate  improvement  in  the 
standard  of  living  of  the  operatives,  but 
also  the  guarding  of  them,  in  the  future, 
against  the  sufferings  incidental  to  unem- 
ployment, sickness,  or  infirmity,  and  of  re- 
lieving the  public  from  the  burden  of  caring 
for  them  in  such  sufferings;  the  gratifying 
of  the  workers'  natural  and  laudable  aspir- 
ation for  industrial  self-government;  and 
the  scarcely  less  important  advantage  to  so- 
ciety, of  the  more  general  diffusion  of 
wealth,  which  the  general  adoption  of  Oper- 
ative Ownership,  in  whole  or  in  part,  would 
involve. 

To  secure  these  advantages  and  insure 
that  the  objects  of  the  government  should 
not  be  defeated,  it  would  be  advisable  that 
the  law  in  question  should  provide,  as  a  con- 
dition of  the  right  of  the  operatives  in  any 
establishment  to  organize  in  corporate 
form,  and  to  avail  themselves  of  its  pro- 
visions, that  such  organizations  should  pro- 
vide in  their  charter  or  articles  of  associa- 


WAYS  AND  MEANS  179 

tion,  that  a  definite  portion,  not  less  than 
one-half,  of  the  share  of  the  profits  earned 
by  the  operatives,  in  excess  of  ordinary 
wages,  should  be  paid  to  the  association 
for  their  use,  and  should  be  placed  in  a 
common  fund  or  funds  for  the  purpose  of 
providing  the  means  of  payment  for  the 
interest  in  the  establishment  which,  under 
the  agreement  before  mentioned,  must  be 
transferred  to  the  operatives  collectively, 
from  time  to  time,  or  after  a  definite  period, 
and  for  various  other  purposes  of  mutual 
benefit 

A  JOINT  OPERATIVE  BOARD. 

For  the  successful  working  out  of  the  plan 
in  contemplation  for  joint  operation,  the 
agreement  entered  into  between  the  own- 
ers' corporation  and  that  of  the  operatives 
should  provide,  among  other  things,  for  a 
Joint  Operative  Board  in  which  owners  and 
operatives  should  be  equally  represented, 
and  of  which  board  the  President  of  the 
owners'  corporation  might  be  ex-officio 
President;  that  such  board  should  have 
complete  control  through  a  General  Man- 
ager whom  it  should  select,  of  all  the  busi- 
ness of  the  establishment;  and  that  the 
net  proceeds  of  the  business,  after  allow- 
ing the  current  standard  rate  of  wages 


180       OPERATIVE  OWNERSHIP 

to  the  operatives  for  their  labor  and  the 
current  or  agreed  rate  of  interest  to  the 
owners  for  the  use  of  their  capital,  should 
be  divided  between  the  owners'  corporation 
and  that  of  the  operatives,  in  proportion  to 
the  value  of  what  each  had  contributed  to 
the  joint  operations;  that  is  to  say:  the 
value  of  the  use  of  the  capital  as  measured 
by  the  current  rate  of  interest,  or  fixed  by 
mutual  agreement,  on  the  one  side,  and  the 
value  of  the  labor,  as  measured  by  the  cur- 
rent standard  rate  of  wages,  or  fixed  by 
mutual  agreement,  on  the  other. 

We  may  further  suppose  that  such  an 
agreement  would  provide  for  the  payment 
of  the  operatives'  wages*  directly  to  each 

*In  the  foregoing  pages  of  this  chapter  the  term  wages 
has  been  used  as  expressing  the  sums  of  money  advanced 
to  the  operatives  from  time  to  time,  weekly,  bi-weekly  or 
monthly,  the  same  as  if  they  were  working  for  an  employer 
instead  of  for  themselves  and  their  co-partners.  In  this  sense 
the  term  is  inaccurate,  and  is  used  only  for  want  of  a  more 
exact  term.  Wages,  as  that  term  is  ordinarily  used  and 
understood,  is  the  recompense  paid  by  an  employer  to  an 
employee  for  labor  performed  by  the  latter.  The  term,  there- 
fore, implies  the  existence  of  the  relation  of  employer  and 
employee.  But  that  relation  is  incompatible  with  that  of 
co-partnership,  which  is  the  real  relation  which  would  exist 
between  capitalists  and  operatives  in  the  plan  herein 
described.  In  the  ordinary  business  co-partnerships  with 
which  we  are  familiar,  it  is  not  unusual  for  each  partner 
or  certain  partners  to  withdraw,  from  time  to  time,  as  may 
be  required,  stated  sums  of  money  to  meet  their  living  ex- 
penses ;  but  such  sums  are  not,  and  cannot  properly  be  called 
wages,  since  the  relation  of  employer  and  employee  does  not 
exist. 

With  this  explanation,  therefore,  I  shall  continue  to  use 
the  term  wages  in  the  convenient,  if  inaccurate,  manner  above 
described. 


WAYS  AND  MEANS  181 

operative,  at  stated  intervals — weekly,  bi- 
weekly, or  monthly— according  to  the  cus- 
tom of  the  industry,  or  as  might  be  agreed 
upon;  and  annually  or  at  shorter  intervals 
if  so  agreed,  a  division  of  the  profits  might 
be  made,  between  owners  and  operatives, 
when  each  operative  would  receive  one-half 
of  his  share  and  the  other  half  would  be 
paid  into  the  treasury  of  the  Operatives'  As- 
sociation, and  placed  to  his  credit. 

OPERATIVES  AS  JOINT  OWNERS. 

At  the  end  of  the  period  designated  in 
the  arrangements  to  be  entered  into  be- 
tween capitalist  and  operatives,  as  above 
explained,  after  which  the  operatives 
should  be  entitled  to  purchase  a  half 
interest  in  the  establishment,  or  sooner,  if 
a  gradual  system  of  purchase  had  been 
provided  for  in  such  arrangements,  and 
when  the  operatives  should  have  made  such 
purchase,  they  should  become  joint  own- 
ers as  well  as  operatives.  And  since  under 
the  law  of  their  organization  they  would 
continue  to  maintain  a  fund  for  the 
further  purchase  of  shares,  as  well  as 
for  other  purposes,  the  operatives  would 
gradually  come  to  own  more  and  more  of 
the  stock  of  the  establishment.  This  result 
would  be  the  more  certain  because  the  oper- 
atives would  have  a  double  incentive  to  ac- 


182       OPERATIVE  OWNERSHIP 

quire  such  shares.  They  would  have  the 
same  incentive  that  the  non-operative  share 
holders  would  have — that  of  a  profitable  in- 
vestment— and  the  further  and  stronger 
incentive  of  the  natural  desire  of  workers 
to  own  the  tools  and  materials  with  which 
and  upon  which,  they  work. 

OPERATIVES  AS  SOLE  OWNERS. 

The  operatives  having,  therefore,  strong- 
er reasons  for  acquiring  the  remaining 
shares  than  the  non-operative  owners  would 
have  for  retaining  them,  the  natural  result 
would  be  that  the  operatives  would  buy  the 
outstanding  shares  as  rapidly  as  their  in- 
creasing means  and  the  willingness  of  the 
non-working  capitalists  to  sell,  would  per- 
mit. With  increased  resources,  as  they 
should  have  after  becoming  joint  owners  of 
the  establishments  in  which  they  worked, 
and  which  resources  would  increase  more 
and  more  with  each  new  acquisition  of 
shares  in  the  establishment,  the  operat- 
ives would  acquire  the  second  half  of  the 
shares  in  a  much  shorter  space  of  time  than 
was  required  for  the  acquisition  of  the  first 
half. 

As  between  the  individual  operatives  and 
the  Operatives'  Association  an  account 
would,  of  course,  be  kept,  showing  the  value 


WAYS  AND  MEANS  183 

of  each  operative's  share  in  the  assets  of 
the  Association  at  any  time.  In  the  event 
of  the  withdrawal — voluntary  or  otherwise 
—of  any  operative  from  the  establishment, 
which  would  mean  also  withdrawal  from 
the  Association;  or  in  the  event  of  the 
death  of  any  operative,  such  operative,  or 
his  legal  representatives  in  case  of  his 
death,  would  be  entitled  to  withdraw  his  in- 
terest in  the  Association,  in  such  manner  as 
should  be  provided  in  the  by-laws  of  the  As- 
sociation. 

Thus,  while  enjoying  from  the  beginning 
of  their  arrangements  under  the  plan  pro- 
posed, larger  incomes,  steady  employment, 
better  conditions  of  work,  a  higher  standard 
of  living,  and  industrial  peace  and  inde- 
pendence, the  operatives  would  gradually 
but  surely,  and  by  their  own  industry,  be- 
come sole  owners  of  the  means  of  produc- 
tion. The  industrial  tool-users  would  have 
become  tool-owners,  and  to  the  laborer 
alone  would  belong  the  whole  produce  of 
his  labor. 

LEGISLATION  NOT  INDISPENSABLE. 

From  what  has  been  said  in  the  foregoing 
pages  of  this  chapter  in  regard  to  the  neces- 
sity of  legislation  to  authorize  the  use  of 


184       OPERATIVE  OWNERSHIP 

govenment  credit  and  the  power  of  emi- 
nent domain  for  the  taking  over  of  industri- 
al establishments  by  the  operatives  therein, 
where  the 'capitalist  owners  were  unwilling 
to  enter  into  arrangements  for  join  opera- 
tion and  joint  participation  in  the  products 
according  to  the  requirements  of  social 
justice,  it  is  npt  to  be  understood  that  such 
arrangements  may  not  be  entered  into  vol- 
untarily, between  the  owners  and  the  oper- 
atives in  any  such  establishment,  without 
legislation.  On  the  contrary,  such  arrange- 
ments may  be  entered  into  freely  by  mutual 
agreement  between  capitalists  and  workers, 
and  there  are  many  establishments  now  in 
existence  in  which  such  arrangements  have 
been  put  into  operation,  in  various  forms, 
on  the  initiative  of  the  owners,  prompted 
by  a  sense  of  justice,  which  arrangements, 
in  most  cases,  have  been  found  to  harmonize 
with  the  financial  interests  of  the  capital- 
ists. 

In  the  following  chapters  I  shall  endeavor 
to  show  that  some  such  arrangements 
whether  effected  by  the  voluntary  acts  of 
employers  or  by  legislative  aid,  are  not  only 
advisable  for  the  promotion  of  justice  as 
between  capitalist  and  laborer,  but  are  con- 
ducive to  the  financial  benefit  of  capitalists 
as  a  class,  and  will  be  productive  of  such 


WAYS  AND  MEANS  185 

relations  between  capital  and  labor  as  are 
urgently  demanded,  if  a  safeguard  is  to  be 
found  against  the  encroachments  of  govern- 
ment upon  the  traditional  rights  of  private 
property  and  private  industry,  and  if  the 
further  spread  of  the  Socialistic  spirit 
swhich  inspires  such  encroachments  is  to  be 
arrested. 


CHAPTER  V. 

BENEFITS  OF  OPERATIVE   OWNER- 
SHIR 

ALL  CLASSES   OF   SOCIETY   BENEFITED. 

The  benefits  to  be  derived  from  Operative 
Ownership,  and  in  a  lesser  degree,  from  the 
transitional  stages  of  joint  operation  and 
joint  ownership,  through  which,  as  we  saw 
in  the  last  preceding  chapter,  Operative 
Ownership  may  be  achieved,  are  manifold, 
and  extend  to  all  classes  of  society.  Para- 
doxical as  it  may  seem,  the  capitalist 
employer  who  would  be  compelled  in  the 
manner  already  explained  to  enter  into 
arrangements  with  his  operatives  for  joint 
operation  and  ultimately  joint  ownership 
of  the  establishment  in  which  they  work,  if 
he  chose  to  continue  in  business  rather  than 
suffer  expropriation,  would  be  by  no  means 
the  least  benefited  of  those  who  would 
profit  by  the  change. 

We  have  seen  in  a  previous  chapter  the 
hostility  with  which  workers  in  many 
industrial  establishments  regard  their 
employers.  It  needs  no  argument  to  con- 

186 


OPERATIVE  OWNERSHIP      187 

vince  any  reasonable  mind  that  such  a  state 
of  feeling,  known,  as  it  doubtless  generally 
is,  to  the  employer,  cannot  but  have  a  dis- 
turbing, and  often  a  distressing  effect  upon 
the  mind  of  the  latter.  Mr.  James  Na- 
smyth,  a  master-engineer  of  some  promi- 
nence in  England,  about  fifty  years  ago, 
gave  expression  to  the  state  of  feeling  of 
many  employers  of  labor  when  he  said,  in 
his  evidence  before  the  Royal  Commission 
on  Trade  Unions,  that  he  had  retired  from 
business  ten  years  earlier  than  he  would 
otherwise  have  done,  such  was  the  irrita- 
tion of  having  to  "walk  on  the  surface  of 
this  continually  threatening  trade  union 
volcano  that  was  likely  to  burst  out  at  any 
moment"* 

BENEFITS  TO  THE  EMPLOYER. 

The  position  of  the  capitalist  employer 
who  finds  himself  thus  walking  on  the  sur- 
face of  a  volcano,  despised  and  hated  by 
employees  who  feel  no  interest  in  his  busi- 
ness other  than  that  of  getting  the  greatest 
amount  of  wages  for  the  least  amount  of 
work,  and  who  care  nothing  whether  the 
employer's  profits  are  great  or  small  so 
long  as  they  get  their  wages,  would  seem  to 


*Report  of  Royal  Commission  on  Trade  Unions,  cited  in 
Co-partnership  in  Industry,  by  C.  R.  Fay,  p.  11. 


188      OPERATIVE  OWNERSHIP 

present  a  sad  contrast  to  that  of  the  capi- 
talist who,  by  meeting  the  just  demands 
and  reasonable  aspirations  of  labor  by  an 
equitable  division  of  profits  and  a  voice  in 
the  management  of  their  joint  operations, 
surrounds  himself  with  workers  who,  while 
combining  their  labor  with  his  capital,  re- 
gard him  as  their  leader  and  friend;  and 
who,  from  their  regard  for  him  as  well  as 
from  their  own  direct  interest  in  the  profits 
of  the  establishment,  bring  to  their  work  the 
highest  degree  of  care  and  efficiency  of 
which  they  are  capable.  It  may  well  be  be- 
lieved that  the  peace  of  mind,  and  the  sense 
of  personal  and  financial  security  which  the 
capitalist  thus  situated  enjoys  is  worth  all 
that  the  workers  would  receive  as  their 
share  of  the  profits  in  excess  of  wages,  with- 
out reckoning  any  countervailing  financial 
advantages  to  be  gained  by  the  capitalist 
through  the  greater  care  and  efficiency  of 
the  workers. 

But  there  would  be  countervailing  ad- 
vantages of  a  financial  character  which 
would  accrue  to  the  capitalist  from  the  in- 
creased care  and  efficiency  which  the  work- 
ers, under  the  system  of  joint  operation, 
would  bring  to  their  work.  Speaking  of  M. 
Leclaire,  who  has  been  called  the  father  of 
profit-sharing,  and  whose  experience  in 


OPERATIVE  OWNERSHIP       189 

that  regard  has  been  described  and  com- 
mended by  John  Stuart  Mill  in  his  Prin- 
ciples of  Political  Economy,  M.  Chevalier,  a 
French  writer  on  Economics,  and  a  con- 
temporary of  M.  Leclaire,  said  in  regard 
to  the  latter's  experience  as  related  by  him- 
self, that  "the  increased  zeal  of  the  work 
people  continued  to  be  a  full  compensation 
to  him,  even  in  a  pecuniary  sense,  for  the 
share  of  profits  which  he  renounced  in  their 
favor."* 

The  literature  of  co-operation  is  full  of 
cases  which  bear  witness  to  the  fact  that 
the  sacrifices  which  capitalist  employers 
have  made,  by  sharing  liberally  the  profits 
of  their  businesses  with  their  employees, 
have  been  more  than  repaid  through  the  in- 
creased efficiency  of  the  workers,  besides 
which,  moral  benefits  of  incalculable  value 
have  been  realized,  both  by  capitalists  and 
laborers.  Upon  this  subject  I  shall  have 
more  to  say  in  a  later  part  of  this  chap- 
ter, under  the  sub-title  of  "Increased 
Efficiency  Under  Profit-Sharing." 

A   SAFEGUARD   AGAINST   GOVERNMENTAL 
INTERFERENCE. 

But  more  important  than  all  other  ma- 


*Quoted    in   Principles    of   Political   Economy,   by  John 
Stuart  Mill,  Book  IV.,  Ch.  VII.,  Sec.  5. 


190       OPERATIVE  OWNERSHIP 

terial  advantages  to  be  gained  by  the  in- 
dustrial capitalist  through  the  means  of 
participation  and  joint  ownership,  is  the 
security  which  the  general  adoption  of  these 
measures  will  give,  as  against  the  danger 
of  Socialism,  which,  as  we  saw  in  an  earlier 
chapter,  is  a  real  and  imminent  danger 
threatening  the  very  existence  of  the  pres- 
ent social  order;  and  the  more  immediately 
imminent  and  almost  palpable  danger  of 
government  regulation  of  all  industry,  ex- 
tending even  to  the  regulation  of  wages  and 
of  prices. 

Industrial  capitalists  are  either  blind  to 
the  significance  of  events  which  are  of  daily 
occurrence  around  them,  or  are  possessed 
of  the  wisdom  of  the  ostrich,  which  is  said 
to  hide  its  head  in  the  desert  sands  when 
danger  threatens,  if  they  fail  to  realize  and 
to  forestall  the  momentous  changes  in  the 
industrial  relations  of  society  which  nearly 
all  well  informed  observers  can  clearly  dis- 
cern as  almost  certain  to  occur  in  the  near 
future — which  are,  indeed,  beginning  to  oc- 
cur already. 

These  changes  are  coming  through  gov- 
ernmental regulation  of  private  industry. 
A  beginning  only  has  been  made  in  the  rail- 
way industry,  wherein  regulative  laws  pre- 
scribe among  other  details  of  management, 


OPERATIVE  OWNERSHIP      191 

the  number  of  cars  which  may  be  hauled  in 
a  train,  and  the  number  of  men  to  be  em- 
ployed in  handling  it;  and  wherein  also 
government  commissions,  state  and  nation- 
al, fix  the  rates  which  railways  may  charge 
for  the  services  which  they  render.  Among^ 
the  disastrous  results  of  this  regulation — 
this  crushing  between  the  upper  and  the 
nether  millstones — may  be  mentioned  the 
facts  that  on  an  actual  capital  conservative- 
ly estimated  at  $18,000,000,000  to  $20,000,- 
000,000,  and  by  some  as  high  as  $22,000,000,- 
000,  the  net  operating  income  of  all  the  rail- 
ways in  the  United  States  amounted,  in 
1914,  to  a  little  less  than  4  per  cent  on  the 
lowest  estimate  above  stated,*  and  that  at 
this  moment  (June,  1916)  one-sixth  of  all 
the  railway  property  in  the  United  States 
is  in  the  hands  of  receivers. 

What  is  happening  to  the  railways  and 
other  public  utilities  today  in  the  matter  of 
regulation  of  prices,  will  happen  to  manu- 
facturers tomorrow.  As  pointed  out  by 
Mr.  Walter  Lippmann,  the  brilliant  young 
author  of  Drift  and  Mastery,  there  is  a 
"consciousness"  growing  up  that  is  likely 
to  be  more  troublesome  to  the  manufacturer 
than  the  "class-consciousness"  of  labor  of 

*Railway  Statistics  of  the  United  States  for  the  year  end- 
ing June  30,  1914,  by  Slason  Thompson. 


192       OPERATIVE  OWNERSHIP 

which  so  much  has  been  written.  Mr.  Lipp- 
mann  calls  it  "consumers'-consciousness," 
and  he  shows  that  it  is  a  power  which  the 
great  industries  will  have  to  reckon  with. 
He  further  shows  that  with  the  coming  of 
"votes  for  women"  this  power  will  increase 
enormously,  for  it  is  the  women  who  do  the 
shopping  and  who  feel  most  directly  the  ef- 
fect of  the  high  cost  of  living;  and  it  will 
be  through  their  influence  that,  by  govern- 
mental regulation,  there  will  be  imposed 
upon  business  a  maximum  of  quality  and  a 
minimum  of  cost* 

If  industrial  capitalists  would  avert  from 
themselves  the  fate  that  has  come  to  the 
railways,  through  the  tyranny  of  the  ma- 
jority finding  expression  through  govern- 
mental regulation,  they  must  place  them- 
selves in  a  position  to  control  governmental 
activities,  in  a  rightful  and  legitimate  man- 
ner, through  the  ballot.  To  this  end  they 
must  associate  themselves  with  labor,  with 
its  great  voting  power  so  closely  that  the 
interests  of  the  worker  and  those  of  the 
capitalist  will  be  identical  in  character,  if 
different  in  degree.  Experience  has  proven 
that  this  identity  of  interest  is  not  realized 
through  the  wage  system.  It  can  only  be 


*Drift  and  Mastery,  by  Walter  Lippman,  pp.  72,  73, 


OPERATIVE  OWNERSHIP      193 

realized  either  through  a  real  partnership 
between  capitalist  and  laborer,  as  in  joint 
operation  or  joint  ownership,  as  described 
in  an  earlier  chapter,  or  by  the  physical 
identity  of  capitalist  and. laborer,  as  in  the 
case  of  complete  Operative  Ownership. 
There  is  no  danger  that  the  number  of  men 
to  be  employed  in  operating  a  threshing  ma- 
chine nor  the  price  at  which  the  farmer 
must  sell  his  wheat,  his  beef  or  his  milk, 
will  ever  be  fixed  by  law,  because  the  farm- 
ers are  strong  in  voting  power,  and  would 
quickly  defeat  any  political  organization 
that  would  attempt  to  trench  upon  their 
legitimate  rights  of  property.  And  the 
same  power,  the  same  security,  and  the 
same  immunity  from  undue  governmental 
interference,  would  appertain  to  industrial 
capital  under  the  system  of  joint  op- 
eration and  joint  ownership,  as  proposed 
in  the  foregoing  chapter.  I  shall  have  oc- 
casion to  refer  further  to  voting  power  as 
a  means  of  conserving  the  legitimate  rights 
of  property,  in  a  later  chapter. 

If  the  operatives  are  not  to  be  allowed  to 
participate  in  the  management  of  industry, 
the  time  will  come  when  the  State  will  par- 
ticipate in  its  management  and  will  itself 
determine  the  extent  of  the  participation. 

If  industrial  operatives  are  not  to  receive 


194      OPERATIVE  OWNERSHIP 

an  equitable  share  of  the  produce  of  their 
labor,  there  will  come  a  time,  as  in  the  case 
of  the  railways,  when  wage  regulation  and 
price  regulation  will  leave  but  small  profits 
for  the  owners  to  divide. 

The  prevention  of  these  conditions  through 
the  power  which  capital  allied  with  labor,  in 
the  manner  before  described,  would  be  able 
to  exert  upon  government,  would  more  than 
compensate  for  any  sacrifice  of  profits, 
through  the  participation  of  labor  therein, 
which  it  would  be  necessary  for  capital  to 
make,  and  should  prompt  every  far-seeing 
capitalist  to  labor  for  the  general  adoption 
of  the  system  hereinbefore  proposed. 

BENEFITS  TO  OPERATIVES. 

The  most  direct  benefit  that  would  re- 
sult from  the  adoption  of  the  plan  proposed 
would,  of  course,  be  that  which  would  ac- 
crue to  the  operatives.  Even  in  the  first 
stage  of  the  transition  from  wage-capital- 
ism to  Operative  Ownership,  that  of  joint 
operation,  the  income  of  the  operatives 
would  be  very  greatly  increased,  as  com- 
pared with  their  wages  under  the  system  of 
wage-capitalism,  even  assuming  the  labor 
efficiency  per  man  to  remain  the  same,  while 
in  the  second  stage  of  the  transition,  that 
of  joint  ownership,  the  income  of  the  oper- 


OPERATIVE  OWNERSHIP      195 

atives  as  compared  with  their  wages  under 
the  regime  of  wage-capitalism,  would  be 
still  further  increased  by  the  earning  of 
their  capital;  and  in  the  final  stage  of  the 
change,  that  in  which  complete  Operative 
Ownership  would  be  realized,  their  income 
would  include  the  entire  profits  of  the  busi- 
ness. 

GREAT  INCREASE  IN  LABOR  EFFICIENCY. 

But  the  labor  efficiency  of  the  operatives, 
man  for  man,  would  not  remain  the  same 
under  joint  operation  or  joint  ownership,  as 
it  is  under  wage-capitalism.  There  would  be 
a  new  and  a  vastly  stronger  incentive  to 
labor  efficiency  than  it  is  possible  to  have 
under  capitalism — the  incentive  of  a  direct 
personal  interest  by  every  operative  in  the 
product  of  his  labor.  The  result  of  such  an 
incentive  would  be  a  better  quality  and  a 
greater  quantity  per  man  of  the  finished 
product,  as  well  as  greater  care  of  machin- 
ery and  plant,  and  greater  economy  of  ma- 
terials, than  it  would  be  possible  to  realize 
by  the  incentive  of  mere  wages. 

There  is,  of  course,  a  limit  to  possible 
labor  efficiency  in  the  physical  endurance 
of  the  worker.  Within  this  limit,  however, 
the  efficiency  of  the  worker  is  determined 
chiefly  by  the  factors  of  incentive  and  train- 


196      OPERATIVE  OWNERSHIP 

ing.  Indeed  the  effectiveness  of  training 
depends  in  large  measure,  as  we  shall  see 
later,  upon  the  incentive  of  the  worker  to 
receive  training.  It  is  incentive  which  makes 
the  labor  of  the  free  man,  working  for 
wages,  three  times  as  efficient  as  the  labor 
of  the  serf.  Upon  this  subject,  Herbert 
Spencer,  the  renowned  English  sociologist 
and  philosopher,  says: 

"Along  with  the  negative  cause  for  the 
relaxation  and  abolition  of  serfdom  there 
is  a  positive  cause — the  unfitness  of  the  serf 
for  productive  purposes.  Most  incentives 
which  make  a  citizen  an  effective  working 
unit  are  not  operative  upon  him  under  a 
regime  which  represses  all  initiative  and 
furnishes  no  stimulus  to  energy.  ...  In 
Austria  the  labor  of  a  serf  is  stated  to  have 
been  equal  to  one-third  of  that  of  a  hired 
man.  Verifications,  here  lacking,  will,  how- 
ever, scarcely  be  needed  by  one  who  watches 
the  doings  of  men  among  ourselves  who  are 
employed  by  vestries  and  kindred  authori- 
ties in  road  repairing  and  cleaning.  They 
listlessly  wield  their  picks  and  shovels  for 
two  or  three  minutes  and  then  stand  up  to 
rest  and  gossip  for  five."* 

But  if  the  labor  efficiency  of  the  free  la- 

^Principles  of  Sociology,  Sec.  807. 


OPERATIVE  OWNERSHIP       197 

borer  as  compared  with  that  of  the  serf 
has  been  greatly  increased  by  the  incentive 
of  the  personal  gain  to  be  realized  by  the 
laborer,  the  efficiency  of  the  free  laborer 
has  been  still  further  increased  by  the  added 
incentive  of  participation  in  the  profits  of 
his  labor,  in  addition  to  his  wages,  in  those 
establishments  in  which  profit-sharing  has 
been  put  into  operation,  even  though  the 
laborers'  share  in  the  profits  has  been  small 
as  compared  to  the  share  which  they  would 
receive  under  the  plan  of  joint  operation 
proposed  in  the  last  preceding  chapter. 

The  incentives  to  labor  efficiency  under 
the  system  of  profit-sharing — where  the 
workers'  share  of  the  profits  is  of  a  sub- 
stantial character,  and  not  a  mere  pittance 
designed  to  serve  as  an  insurance  against 
strikes — though  lesser  in  degree,  are  simi- 
lar in  kind  to  those  of  Operative  Ownership 
and  the  transitional  stages  of  joint  opera- 
tion and  joint  ownership,  through  which,  as 
we  saw  in  an  earlier  chapter,  that  system, 
in  its  completeness,  is  ultimately  to  be 
achieved.  The  beneficial  results,  therefore, 
which  the  experience  of  workers  under  cer- 
tain forms  of  Labor  Copartnership  would 
warrant  us  in  assuming  as  likely  to  be 
realized  in  these  stages,  would  flow  in  even 
greater  degree  from  Operative  Ownership, 


198      OPERATIVE  OWNERSHIP 

INCREASED  EFFICIENCY  UNDER  PROFIT- 
SHARING. 

Of  the  effects  on  the  workmen  produced 
by  participation  in  the  profits  under  the 
capitalist  system,  Professor  Sedley  Taylor, 
in  his  work  on  profit-sharing,  says:  "The 
increased  activity  of  the  workman,  his 
greater  care  of  the  tools  and  materials  en- 
trusted to  him,  and  the  consequent  possi- 
bility of  saving  a  considerable  part  of  the 
cost  of  superintendence,  enable  profits  to 
be  obtained  under  a  participating  system 
which  would  not  accrue  under  the  estab- 
lished routine." 

In  summing  up  the  results  of  profit-shar- 
ing as  shown  in  several  establishments  men- 
tioned by  Mr.  Taylor,  that  writer  says: 

"The  benefits  accruing  from  participa^ 
tion  successfully  practiced  may  be  thus 
summed  up.  It  furnishes  to  the  workman 
a  supplementary  income  under  circum- 
stances which  directly  encourage,  or  even 
by  a  gentle  compulsion  actually  enforce, 
saving;  and  by  associating  him  in  a  very 
real  sense  with  his  employer  it  arouses  as- 
pirations from  which  great  moral  improve- 
ments may  be  confidently  anticipated.  The 
employer,  besides  sharing  in  whatever  sur- 
plus profits  are  realized  by  the  more  effi- 
cient labor  which  participation  calls  forth, 


OPERATIVE  OWNERSHIP       199 

obtains  the  boon  of  industrial  stability  and 
the  support  of  a  united  corporate  feeling 
elsewhere  unknown." 

The  expressions  above  quoted  from  the 
work  of  Mr.  Taylor  are  typical  of  innumer- 
able others  which  might  be  quoted  from 
workmen,  employers  and  investigators  who 
have  published  the  results  of  their  experi- 
ence or  observation  in  regard  to  profit- 
sharing,  which  expressions  may  be  found 
abundantly  in  the  literature  of  co-opera- 
tion. In  the  cases  of  profit-sharing  which 
have  elicited  the  expressions  referred  to, 
the  share  of  the  profits  falling  to  the  work- 
men generally  ranged  from  ten  to  twenty 
per  cent,  on  the  ordinary  wages;  but  it 
often  fell  below  the  former  figure,  and 
rarely  exceeded  the  latter.  The  increased 
efficiency  of  the  workmen  under  the  stimu- 
lus of  participation  has  been  variously  stat- 
ed at  from  fifteen  per  cent,  to  thirty-three 
and  one-third  per  cent,  of  their  former  ef- 
ficiency. 

When  it  is  said  that  the  incentive  of 
profit-sharing  has  increased  the  efficiency 
of  labor  by  one-third  as  compared  with  the 
ordinary  wage-system,  it  will  be  recognized 
as  a  conservative  statement  by  any  one  who 
has  ever  been  in  a  position  to  know  the  feel- 
ing prevalent  among  industrial  operatives 


200      OPERATIVE  OWNERSHIP 

generally,  in  regard  to  the  result  to  them- 
selves and  their  class  of  working  up  to  their 
full  capacity. 

FALLACIOUS  NOTIONS  ABOUT  INCREASE  OF 
OUTPUT. 

The  fallacious  notion  still  prevails  very 
generally  among  workmen,  as  it  has  pre- 
vailed from  the  beginning  of  the  factory 
system,  that  any  material  increase  in  the 
output  of  a  machine  or  in  the  product  of  a 
man's  labor  would  result  in  throwing  other 
men  out  of  work.  Notwithstanding  the  ef- 
forts of  many  leaders  among  the  laboring 
classes  to  correct  this  erroneous  notion  it 
still  prevails  to  a  very  great  extent. 

This  notion  prevails  more  generally  in 
Europe  than  in  America,  and  in  England 
more  than  any  other  industrial  nation  of 
Europe,  and  its  results  are  most  disastrous 
to  the  prosperity  of  the  country.  In  his 
book,  The  War  of  the  Classes,  Jack  Lon- 
don, a  Socialist  writer  of  great  popularity, 
and  one  whose  sympathy  with  the  laboring 
classes  cannot  be  doubted,  says  that  the 
English  laborer  today  is  starving  because 
he  is  not  a  scab.  He  practices  the  policy 
called  "ca'canny/'  which  means  "go  easy." 
In  order  to  get  most  for  least,  he  performs, 
in  many  trades,  but  from  one-fourth  to  one- 


OPERATIVE  OWNERSHIP       201 

sixth  of  the  labor  of  which  he  is  capable. 
As  an  instance  of  this,  Mr.  London  men- 
tions the  building  of  the  Westinghouse 
Electric  Works  at  Manchester.  The  Brit- 
ish limit  of  work  for  bricklayers  was  400 
bricks  per  day  per  man.  The  Westinghouse 
Company  brought  over  a  driving  American 
contractor,  assisted  by  several  driving 
American  foremen,  and  the  English  brick- 
layer quickly  attained  an  average  of  1800 
to  2500  bricks  per  day.* 

Nor  is  America  free  from  the  practice 
of  "ca'canny"  or,  as  it  is  called  here,  "sol- 
diering." On  the  contrary,  the  wide  prev- 
alence of  the  practice  in  this  country  is 
attested  by  many  writers  whose  means  of 
observation  and  experience  qualify  them  to 
speak  with  authority  on  this  subject.** 

MOST  FOR  LEAST  AND  LEAST  FOR  MOST. 

The  same  impulse  which  prompts  the  em- 
ployer to  exact  most  for  least  evokes  on  the 
part  of  the  workman  the  counter-impulse 
to  give  least  for  most,  hence  he  soldiers, 
giving  only  a  part  of  the  efficiency  of  which 
he  is  capable.  With  the  motive  for  soldier- 
ing removed,  and  the  incentives  of  self  in- 
terest and  mutual  regard  freely  operating 

*The  War  of  the  Classes,  p.  136. 

**The  Social  Unrest,  by  John  Graham  Brooks,  p.  10. 


202      OPERATIVE  OWNERSHIP 

upon  workmen  and  capitalists,  it  is  easy  to 
see  that  the  efficiency  of  the  workmen  would 
be  very  greatly  increased.  This  means  that 
with  the  same  capital,  the  same  building 
space,  the  same  operating  expenses,  the  out- 
put of  the  plant  would  be  largely  increased, 
which  increase,  except  the  cost  of  the  ad- 
ditional raw  material,  would  practically  all 
go  to  increase  the  profits,  which  in  many 
cases,  we  may  well  suppose  to  be  more  than 
doubled  thereby.  And  if  the  productive  ef- 
ficiency of  the  operatives  were  largely  in- 
creased by  the  incentive  of  profit  sharing 
in  the  form  described  by  Sedley  Taylor, 
where  the  workers'  share  of  the  profits 
amounted  to  only  from  ten  to  twenty  per 
cent,  of  their  wages,  without  any  voice  in 
the  management,  we  may  well  believe  that 
the  limit  of  efficiency  would  be  attained  un- 
der joint  operation  and  joint  ownership,  as 
herein  proposed,  with  the  greater  share  of 
the  profits  which  would  fall  to  the  workers 
under  that  system. 

SCIENTIFIC  MANAGEMENT. 

Hitherto,  in  this  chapter,  in  speaking  of 
labor  efficiency,  I  have  had  in  mind  the 
efficiency  attainable  by  the  ordinary  meth- 
ods of  management  and  operation  which 
have  been  in  vogue  with  only  slight  varia- 


OPERATIVE  OWNERSHIP       203 

tion  since  the  beginning  of  the  factory  sys- 
tem. 

Within  the  last  few  years  there  has  been 
discovered  what  may  be  called  a  new  sci- 
ence, the  science  of  management,  or,  as  it 
is  sometimes  called,  "Scientific  Manage- 
ment." The  fundamental  laws  of  this 
science  were  discovered  by  Frederick 
Winslow  Taylor,  and  are  being  developed 
by  him  and  a  host  of  his  followers.  This 
science,  although  still  in  its  infancy,  prom- 
ises that  with  little  or  no  additional  invest- 
ment of  capital  in  machinery  and  equip- 
ment, and  without  any  greater  expenditure 
of  physical  energy,  the  productive  efficien- 
cy of  human  labor  will  be  greatly  increased, 
the  increase  amounting,  in  some  occupa- 
tions, to  from  one  hundred  to  three  hun- 
dred per  cent. 

That  this  new  science  will  work  a  rer- 
olution  in  industrial  production  comparable 
in  its  results  to  that  which  was  produced 
by  the  change  from  hand  labor  to  ma- 
chinery, is  confidently  expected.  But  the 
new  system  is  meeting  with  vigorous  op- 
position from  labor  organizations,  who  see 
in  it  a  means  to  be  used  by  capitalists  for 
"speeding  up"  their  employees,  so  that  to 
gain  a  small  advance  in  their  wages  they 
will  largely  increase  the  output,  and  cor- 


204      OPERATIVE  OWNERSHIP 

respondingly  increase  the  capitalists'  prof- 
its on  their  labor.  Nor  are  the  suspicions 
of  the  labor  organizations  wholly  without 
foundation;  for  many  of  the  capitalists 
who  have  adopted  the  system  have  begun 
by  taking  for  themselves  the  lion's  share  of 
the  increased  profit. 

As  bearing  out  this  view  we  may  take 
for  example,  one  of  the  cases  described  by 
Mr.  Frederick  Winslow  Taylor  as  showing 
the  increased  efficiency  to  be  realized  by 
the  new  system — that  of  the  ore-handler 
mentioned  at  page  44  of  his  book,  "The 
Principles  of  Scientific  Management."  The 
ordinary  day's  work  of  the  ore-handler  un- 
der the  old  system  was  12%  tons  of  ore, 
for  handling  which  he  received  $1.15.  Un- 
der the  new  system  he  handled  47  tons  per 
day.  For  handling  the  additional  34%  tons 
he  received  the  additional  sum  of  seventy 
cents — two  cents  per  ton.  It  was  worth 
nine  and  one-fifth  cents  per  ton  to  handle 
the  ore,  else  the  employers  would  not  have 
paid  that  price  ($1.15  for  12%  tons).  The 
handling  of  the  additional  34%  tons  there- 
fore was  worth  $3.11;  of  this  amount  the 
employers  paid  the  laborer  70  cents  and 
kept  for  themselves  $2.41. 

But  whether  the  objections  to  scientific 
management  under  the  capitalist  system 


OPERATIVE  OWNERSHIP      205 

are  well-founded  or  ill-founded,  they  could 
not  be  urged  under  a  regime  of  Operative 
Ownership.  A  man  working  for  himself 
would  welcome  the  aid  of  any  one  who 
could  show  him  how,  without  any  addition- 
al labor  or  expense,  he  could  double  or 
treble  his  output. 

Scientific  management  of  industry  is  es- 
sentially the  same  as  scientific  farming  ap- 
plied to  agriculture.  The  government  ex- 
pends millions  of  dollars  annually  to  teach 
farmers  how  to  conduct  their  agricultural 
operations  more  profitably,  and  the  farmers 
welcome  such  aid,  knowing  that  there  is 
no  one  standing  over  them  to  seize  three- 
fourths,  nor  any  other  part,  of  what  they 
may  be  able  to  gain  by  the  adoption  of 
scientific  methods.  In  like  manner  oper- 
ative-owners, knowing  that  there  would  be 
no  capitalist  employer  to  grab  75  cents 
out  of  every  dollar  that  they  might 
produce  by  the  increased  efficiency  which 
comes  of  scientific  management,  but 
that  it  would  be  all  for  themselves,  would 
be  quick  to  adopt  the  new  system. 

CHEAPENING  OF  PRODUCTS. 

It  is  not  to  be  supposed,  with  the  general 
adoption  of  scientific  management,  and  the 
greatly  increased  output  per  man  and  per 


206      OPERATIVE  OWNERSHIP 

machine  which  would  result  therefrom, 
that  the  price  of  commodities  would  not  be 
reduced.  Every  substantial  improvement 
in  labor  saving  machinery  whereby  the  cost 
of  production  has  been  materially  reduced, 
has  resulted  in  a  reduction  of  the  price  to 
the  consumer,  as  well  as  increased  profit  to 
the  manufacturer.  The  like  result  would 
doubtless  follow  the  general  adoption  of 
scientific  management.  Such  general  re- 
duction of  prices  of  manufactured  com- 
modities would  result  in  a  material  reduc- 
tion of  the  cost  of  living,  and  thus  the 
operative-manufacturer  would  gain  at  both 
ends — lower  cost  of  living  at  one  end,  and 
increased  income  at  the  other. 

Another  benefit  to  the  workingman,  sec- 
ond in  importance  only  to  that  of  the  in- 
creased income  which  would  result  from 
Operative  Ownership,  would  be  certainty 
and  steadiness  of  employment.  Under 
wage-capitalism,  as  we  have  seen,  if  the 
owner  cannot  run  his  plant  at  a  profit,  as 
sometimes  happens  in  times  of  business  de- 
pression, he  will  close  it  down,  throwing 
the  workmen  out  of  employment,  and  often 
causing  great  suffering  and  want.  Under 
Operative  Ownership,  partial  or  complete, 
this  would  not  occur.  The  wider  margin 
of  profit  which,  as  we  have  seen,  the  in- 


OPERATIVE  OWNERSHIP       207 

creased  efficiency  to  be  attained  under  this 
system  would  enable  establishments  oper- 
ating under  it  to  realize,  would  enable  such 
establishments  to  reduce  prices  to  a  point 
at  which  there  would  be  no  profit  under  the 
capitalist  system,  and  still  leave  them  a 
profit.  There  is  no  economic  law  better  rec- 
ognized, or  more  universally  applied  than 
that  the  lowering  of  prices  tends  to  stim- 
ulate demand.  Capitalists,  however,  when 
times  are  dull,  and  there  is  a  slackening  of 
demand  for  their  products,  prefer  to  wait, 
with  closed  shops,  until  the  demand  is  re- 
stored by  scarcity  of  the  commodity  pro- 
duced, rather  than  to  stimulate  that  de- 
mand by  temporarily  sacrificing  profits. 

The  farmer,  when  he  finds  at  the  end  of 
the  year  that  his  farm  has  not  yielded  him 
a  profit,  does  not  dismiss  his  hands,  sell  off 
his  stock,  and  let  his  fields  lie  fallow,  and 
his  pastures  grow  up  in  weeds,  until  prices 
of  farm  products  rise  through  scarcity  of 
supply.  He  rather  cultivates  his  fields  more 
assiduously,  and  economizes  more  strictly, 
than  before,  determined  to  realize  a  profit 
or  minimize  his  loss  by  increased  diligence 
and  economy,  hence  there  is  no  unemploy- 
ment question  among  farmers.  In  like  man- 
ner the  operatives,  whether  as  sole  owners 
or  as  joint  owners  with  non-working  capi- 


208       OPERATIVE  OWNERSHIP 

talists,  having  regard  to  the  employment  of 
their  time  to  the  best  advantage  possible, 
rather  than  to  waste  it  in  idleness,  would 
be  prompted  to  continue  the  dperation  of 
their  plants,  and  if  necessary  sacrifice  a 
part  of  the  profits,  in  order  to  stimulate  a 
demand  for  their  products. 

UNEMPLOYMENT  PROBLEM  SOLVED. 

According  to  a  survey  of  unemployment 
covering  fifteen  of  the  principal  cities  of 
the  United  States,  made  by  the  Metropol- 
itan Life  Insurance  Company  of  New  York 
for  the  United  States  Department  of  La- 
bor, in  the  Spring  of  1915,  11.5  per  cent,  of 
the  wage-earning  class  were  unemployed, 
and  16.6  per  cent,  only  partially  employed, 
in  those  cities.  This  was  during  a  period 
of  extraordinary  business  depression,  and 
it  may  fairly  be  assumed,  was  a  considera- 
bly greater  percentage  than  would  be  either 
partially  or  wholly  unemployed  under  nor- 
mal conditions. 

Under  the  influence  mentioned  in  the 
second  preceding  paragraph,  namely:  the 
probable  desire  of  operative  owners  to  run 
their  plants  at  a  reduced  profit,  rather  than 
close  them  down,  which  influence  would  be 
operative  in  time  of  business  depression; 
and  with  the  greater  purchasing  power  and 


OPERATIVE  OWNERSHIP  209 

greater  demand  for  commodities  which 
the  increased  incomes  of  the  working 
classes  would  give  them  under  the  sys- 
tem of  Operative  Ownership,  in  any  of  its 
stages,  the  unemployed  labor  of  the  coun- 
try would  be  quickly  absorbed  in  supplying 
the  increased  demand,  and  the  problem  of 
unemployment,  so  far  as  those  who  were 
not  physically  incapacitated  for  work  were 
concerned,  would  be,  in  large  measure, 
solved. 

As  to  those  who  might  become  incapaci- 
tated by  accident,  sickness  or  old  age,  they 
would  be  provided  for  through  their  shares 
in  the  mutual  benefit  fund  of  the  operatives 
association  mentioned  in  the  last  preceding 
chapter,  whether  used  as  direct  insurance 
or  as  a  fund  with  which  to  carry  outside 
insurance  against  such  contingencies ;  while 
in  case  of  retirement  or  withdrawal  of  any 
member  from  the  operatives  association  at 
the  close  of  his  industrial  career,  such  mem- 
ber's interest  in  the  establishment  would 
have  a  value  which  would  enable  him  to 
spend  his  declining  years  in  comfort  and 
leave  a  substantial  sum  with  which  to  pro- 
vide for  his  dependents,  at  his  death. 

It  is  not  pretended,  however,  that  this 
nor  any  other  means  will  ever  utterly  abol- 
ish poverty.  While  human  nature  endures 


210       OPERATIVE  OWNERSHIP 

there  will  be  improvident,  lazy,  unthrifty 
and  vicious  individuals,  as  well  as  some 
who  will  be  naturally  deficient  and  depend- 
ent through  no  fault  of  their  own.  The 
Master  spoke  no  parable,  but  an  everlast- 
ing truth,  when  he  said:  "The  poor  ye 
have  always  with  you."  In  so  far  however, 
as  people  possess  the  ability  and  the  in- 
clination to  help  themselves,  poverty  will 
be  abolished  by  Operative  Ownership. 
Those  who  lack  these  qualities  will  be  poor 
and  dependent  under  any  social  system 
that  can  be  devised. 

BENEFITS  TO  THE  STATE. 

The  State  also,  in  its  governmental  ca- 
pacity, will  benefit  through  the  system  of 
Operative  Ownership  by  the  lessening  of 
the  cost  of  government.  That  poverty  often 
leads  to  crime  is  a  proposition  which  scarce- 
ly needs  to  be  supported  by  proofs  beyond 
the  facts  of  daily  occurrence  under  the  ob- 
servation of  those  who  are  in  a  position 
to  note  the  things  that  are  happening 
around  them.  The  persons  of  whom  we 
daily  read  as  perpetrators  of  crimes  against 
property,  such  as  theft,  robbery,  burglary, 
and  the  like,  are  not,  generally  speaking, 
persons  who  have  the  means  of  obtaining 
a  livelihood  in  an  honest  way.  Even  crimes 


OPERATIVE  OWNERSHIP  211 

against  the  person  are  in  no  small  degree 
traceable  to  poverty.  Observers  of  social 
conditions  uniformly  attest  that  one  of  the 
most  frequent  causes  of  drunkenness 
among  the  working  classes  is  the  hard,  dis- 
couraging conditions  under  which  they 
live,  among  which  conditions  are  low  wages, 
harsh  treatment,  uncertainty  of  employ- 
ment and  the  general  helplessness  and 
hopelessness  of  their  situation.  The  effect 
of  these  conditions  is  to  produce,  in  those 
who  suffer  from  them,  a  feeling  which  finds 
utterance  in  the  often-heard  expression: 
"a  poor  man  has  no  show."  Such  persons 
often  come  to  regard  themselves,  and  not 
wholly  without  reason,  as  the  victims  of  so- 
cial conditions  for  which  society  is  respon- 
sible, and  a  feeling  of  resentment  against 
society  takes  possession  of  them.  A  man 
in  such  a  state  of  feeling  is  only  restrained 
from  the  commission  of  crime  by  fear  of 
the  consequences.  Often  this  fear  is  over- 
come and  crime  results.  If,  as  often  hap- 
pens, such  a  person  takes  to  drinking  and 
becomes  a  drunkard  he  is  prone  to  the  com- 
mission of  that  long  train  of  offenses 
against  the  law  which  flows  from  drunk- 
enness. 

When  Henry  Ford,  the  head  of  the  Ford 
Motor  Company  which  inaugurated  at  the 


212       OPERATIVE  OWNERSHIP 

beginning  of  1914  a  profit  sharing  scheme 
by  which  its  employees  received  a  share  in 
the  profits,  amounting  to  from  50  to  100 
per  cent,  of  their  ordinary  wages,  was  tes- 
tifying, about  a  year  later,  before  the 
United  States  Commission  on  Industrial 
Relations,  he  said,  concerning  the  effect  of 
the  change  as  affecting  the  habits  of  the 
men  in  regard  to  sobriety:  "Police  justices 
say,  where  Ford  employees,  recognized  by 
their  badges,  were  almost  daily  seen  in  the 
prisoners'  dock,  up  to  a  year  ago,  since  Jan- 
uary, 1914,  they  have  been  noticeably  ab- 
sent, and  are  rarely  among  the  unfortu- 
nates brought  to  justice." 

In  its  report  to  the  Chicago  City  Council, 
the  Commission  on  Crime  appointed  by  the 
first  named  body,  after  a  thorough  investi- 
gation, showed  that,  in  the  language  of  the 
Commission: 

"The  pressure  of  economic  conditions  has 
an  enormous  influence  in  producing  certain 
types  of  crime.  Unsanitary  housing  and 
working  conditions,  unemployment,  wages 
inadequate  to  maintain  a  human  standard 
of  living,  inevitably  produce  the  crushed  or 
distorted  bodies  and  minds  from  which  the 
army  of  crime  is  recruited.  The  crime 
problem  is  not  merely  a  question  of  police 
and  courts,  it  leads  to  the  broader  problems 


OPERATIVE  OWNERSHIP  213 

of  public  sanitation,  education,  home  care, 
a  living  wage,  and  industrial  democracy."* 
Prosperity  begets  in  the  average  man  a 
feeling  of  pride  and  self-respect  which  ex- 
ercises a  deterrent  influence  as  against  all 
those  things  of  which  society  disapproves, 
and  practically  all  offenses  against  the 
state  come  within  this  category.  The  pros- 
perous man,  too,  is  more  readily  and  more 
frequently  brought  under  religious  influ- 
ences. The  poor  man  and  his  family  often 
feel  uncomfortable,  with  their  shabby 
clothes,  among  their  better  dressed  neigh- 
bors who  attend  church  services,  hence  they 
stay  away.  Religious  influence  is  a  power- 
ful factor  making  for  better  citizenship. 
No  man  in  any  civilized  land  today  can  be 
true  to  the  principles  of  his  religion, 
whether  Jew  or  Christian,  Protestant  or 
Catholic,  without  being  a  good  citizen,  for 
the  essentials  of  good  citizenship  are  in- 
cluded in  the  essentials  of  every  numer- 
ically important  religion  to  be  found  in 
Christendom. 

BENEFITS  TO  SOCIETY. 

In  a  more  immediate  sense,  however,  Op- 
erative   Ownership    and    the    transitional 

^Report  of  City  Council  on  Crime t  Summary  of  Findings. 
Sec.  14,  p.  12, 


214       OPERATIVE  OWNERSHIP 

stages  of  joint  operation  and  joint  owner- 
ship with  capital  before  mentioned  as  lead- 
ling  to  the  ultimate  achievement  of  that  sys- 
ftem,  would  benefit  the  state  by  ending  the 
:class  struggle  which,  almost  from  the  birth 
of  wage-capitalism,  has  been  the  invariable 
result  of  the  attitude  of  the  last  named  in- 
stitution toward  the  laboring  classes.  With 
the  general  adoption  of  Operative  Owner- 
ship the  relation  of  employer  and  employee 
in  industrial  establishments  would  be  abol- 
ished, class  warfare  would  end,  and  there 
would  be  ushered  in  an  era  of  industrial 
peace. 

It  will  be  readily  seen  that  any  system 
which  would  have  the  effect  of  materially 
increasing  the  income  of  the  laboring  class- 
es, which  constitute  so  large  a  portion  of 
the  community,  would  benefit  all  other 
classes  in  the  community  who  directly  or 
indirectly  minister  to  the  wants  of  the  for- 
mer. The  physician,  the  dentist,  the  law- 
yer, the  artist,  the  newspaper  publisher, 
the  architect,  the  dressmaker,  and  the  in- 
numerable other  trades  and  professions 
among  which  the  working  classes  spend 
their  incomes,  whether  for  necessities  or 
luxuries,  would  themselves  have  their  in- 
comes increased  by  the  distribution  among 
them,  in  exchange  for  the  service  or  com- 


OPERATIVE  OWNERSHIP  215 

modities  which  they  should  render  or  sup- 
ply, of  the  increased  incomes,  or  a  substan- 
tial part  thereof,  of  the  working  classes, 
now  become  owners  or  partners  in  the  var- 
ious establishments  in  which  they  worked; 
and  thus  the  prosperity  of  the  working 
classes  would  mean  the  prosperity  of  prac- 
tically all  other  classes  of  society. 

Closely  approaching,  if  not  indeed  ex- 
ceeding, in  importance,  the  benefits  to  be 
derived  to  the  working  classes  from  Oper- 
ative Ownership,  are  the  benefits  to  be  de- 
rived to  society  in  general  through  the  gen- 
eral diffusion  of  wealth  involved  in  the  adop- 
tion of  the  system  of  Operative  Ownership. 
It  is  a  matter  of  frequent  observation  and 
comment  that  the  most  serious  menace  to 
the  well  being  of  society,  and  sometimes  it 
is  even  said,  to  the  perpetuity  of  the  Repub- 
lic, is  the  unprecedented  concentration  of 
wealth  in  the  hands  of  a  relatively  small 
number  of  persons,  which  has  taken  place 
within  the  past  quarter  of  a  century.  This 
menace  is  generally  supposed  to  lie  in  the 
prodigious  power  which  wealth,  thus  con- 
centrated, gives  its  possessors. 

No  less  real  is  the  danger  from  the 
opposition  which  such  concentration  of 
wealth  has  called  forth.  Legislative  bodies, 
whose  members,  consciously  or  uncon- 


216       OPERATIVE  OWNERSHIP 

sciously,  have  absorbed,  in  varying  degrees, 
the  spirit  of  Socialism  with  which  society 
is  permeated,  lending  a  ready  ear  to  the 
popular  clamor  against  all  manner  of  "big 
business,"  have  placed  in  the  statute  books 
a  variety  of  laws  of  a  repressive  and  reg- 
ulative character,  which  trench  upon  the 
traditional  rights  of  private  property  in 
ways  which  affect  the  fundamental  princi- 
ples upon  which  rest  the  title  of  the  work- 
man to  his  cottage  no  less  than  the  title  of 
the  millionaire  to  his  palace. 

With  the  general  diffusion  of  wealth  in- 
volved in  the  system  of  Operative  Owner- 
ship, making  every  operative  a  capitalist, 
the  process  of  concentration  of  wealth  in 
the  hands  of  a  few  would  cease;  and  the 
wealth  already  so  concentrated  would  in 
time  become  diffused  through  the  operation 
of  natural  forces.  For  though  the  adage 
"it  is  but  three  generations  from  shirt 
sleeves  to  shirt  sleeves"  is  not  to  be  taken 
literally,  it  still  contains  an  element  of 
truth.  As  a  property  owner  and  tax-payer, 
there  would  come  to  every  operative-owner 
a  sense  of  responsibility  and  of  the  sacred- 
ness  of  the  rights  of  private  property 
which  would  operate  to  restore  that  insti- 
tution to  the  position  which  it  held  in  the 
estimation  of  civilized  society  from  the  ear- 


OPERATIVE  OWNERSHIP  217 

liest  ages.  Thus  while  Operative  Owner- 
ship would  tend  to  prevent  the  accumula- 
tion of  collossal  fortunes,  it  would  tend  to 
restore  and  safeguard  the  rights  of  prop- 
erty in  general,  which  rights  of  late  years 
have  tended  more  and  more  as  time  went 
on  to  become  an  uncertain  quantity.  Next 
to  the  emancipation  of  labor  the  restora- 
tion and  conservation  of  the  rights  of  pri- 
vate property  are  perhaps  the  greatest  ben- 
efits which  Operative  Ownership  could  ren- 
der to  society. 


CHAPTER  VL 

DISAPPEARING  RIGHTS  OF 
PROPERTY. 

CONSERVATIVE   TENDENCY   OF  OPERATIVE 
OWNERSHIP. 

In  the  last  foregoing  chapter  I  discussed 
the  advantages  of  Operative  Ownership  to 
the  capitalist,  to  the  operatives  and  to  the 
State.  I  touched  briefly,  also,  upon  the 
benefits  to  society  at  large.  But  the  great- 
est advantage  to  accrue  to  society  in  this 
general  sense,  from  the  system  of  Opera- 
tive Ownership  has  scarcely  been  men- 
tioned. It  is  that  of  conserving  what  re- 
mains, and  of  restoring  what  has  been  lost, 
of  the  traditional  rights  of  property  which 
have  come  down  to  us  through  immemorial 
ages,  but  which,  within  the  last  generation 
or  two  began  to  be  encroached  upon  by 
radical  legislation,  and  are  today  rapidly 
disappearing  before  the  spread  of  Socialis- 
tic principles  which  daily  find  expression  in 
new  forms  of  governmental  activities 
which  exemplify  a  very  pronounced  tend- 
ency to  enlarge  the  powers  of  government 
and  to  contract  the  rights  of  the  individual, 

218 


THE  RIGHTS  OF  PROPERTY  219 

more  especially  in  regard  to  the  rights  of 
property. 

To  the  men,  and  they  are  numbered  in 
many  millions,  who  have  neither  property 
nor  hope  of  acquiring  it  under  the  regime 
of  wage-capitalism,  the  term  property,  or 
the  thing  which  it  represents,  has  little 
sacredness.  The  law  forbids  them  under 
penalty  of  imprisonment,  to  take  or  destroy 
the  property  of  another,  therefore  they  re- 
frain from  doing  so.  But  as  to  what  the 
law  itself  or  its  representatives  may  do 
with  it  they  are  little  concerned.  If  they 
can  be  made  to  believe  that  by  confiscation, 
or  by  certain  forms  of  taxation,  or  of  gov- 
ernmental control  which  are  equivalent  to 
confiscation,  they  and  the  class  to  which 
they  belong  will  be  benefited,  while  the 
owners,  whom  they  are  taught  to  regard  as 
their  exploiters,  and  the  exploiters  of  their 
class,  will  suffer,  they  are  more  than  likely 
to  favor  them  and  to  aid  them.  But  change 
those  millions  of  propertyless  men  into 
property  owners,  as  would  be  done  by  the 
general  adoption  of  Operative  Ownership, 
and  there  would  be  multiplied  millions  of 
property  owners  to  whom  the  terms  "prop- 
erty" and  "rights  of  property"  would  have 
a  meaning  such  as  they  have  never  had  be- 
fore to  sos  large  a  proportion  of  the  popula- 


220       OPERATIVE  OWNERSHIP 

tion  of  any  country,  and  a  sacredness  such 
as  no  legislative  body  might  venture  to  vio- 
late with  impunity. 

That  the  reader  may  better  understand 
the  manner  in  which  Operative  Ownership 
will  operate  to  restore  and  conserve  the  tra- 
ditional rights  of  property  it  is  necessary 
that  some  space  be  devoted  to  an  examina- 
tion of  the  nature  of  property  and  of  the 
rights  which  appertain  to  it  in  civilized 
society,  and  in  particular  under  the  con- 
stitution and  laws  of  the  United  States. 
Also  the  means  must  be  examined  by  which 
these  rights  have  been  impaired,  and  by 
which  their  further  impairment  or  destruc- 
tion is  threatened  through  the  activities  of 
government,  in  the  face  of  constitutional 
safeguards  designed  by  the  founders  of  the 
nation  to  set  a  limit  to  the  powers  of  the 
government  in  its  relation  to  the  individual, 
and  to  preserve  inviolate  the  personal  and 
property  rights  of  the  individual  as  against 
the  activities  of  government  beyond  that 
limit. 

THE  RIGHTS  OF  PRIVATE  PROPERTY. 

The  term  Property,  in  the  sense  in  which 
it  will  be  most  frequently  used  in  this  chap- 
ter, signifies  the  "right  of  ownership  in  ex- 
ternal things."  In  another  sense,  and  one 


THE  RIGHTS  OF  PROPERTY    221 

in  which  it  is  most  commonly  used  in  rela- 
tion to  everyday  affairs,  it  signifies  the 
thing  owned.  The  rights  of  property  as  de- 
fined by  Blackstone,  the  famous  English 
commentator,  consist  in  the  free  use,  enjoy- 
ment and  disposal  of  one's  acquisitions  by 
the  individual  subject  (or  citizen),  without 
any  control  or  diminution  save  only  the  law 
of  the  land,*  and  the  control  which  may  be 
exercised  by  law,  having  due  regard  to  the 
natural  rights  of  the  individual,  is  limited 
to  the  necessities  of  the  State  in  the  per- 
formance 'of  its  governmental  functions. 

Law  writers  are  not  in  accord  as  to  the 
origin  of  the  right  of  private  property — 
whether  it  had  its  origin  in  the  laws  of  so- 
ciety or  in  the  law  of  nature  which  ante- 
dated those  of  society.  But  whatever  may 
have  been  the  origin  of  the  institution  of 
property  it  is  certain  that  the  rights  which 
appertain  to  it  now  are,  within  certain 
limitations,  subject  to  control  and  regula- 
tion by  law.  These  limitations  consist  in 
the  United  States,  of  certain  restraints  im- 
posed by  the  people,  speaking  through  their 
national  and  state  constitutions,  upon  their 
state  and  national  governments,  and  de- 
signed among  other  things  to  safeguard  the 


^Commentaries,  Book  II,  Ch.  1. 


222      OPERATIVE  OWNERSHIP 

rights  of  private  property  against  any  gov- 
ernmental action  which  might  operate  to 
impair  or  destroy  those  rights  without  com- 
pensation to  the  owner.  These  restraints, 
and  the  manner  in  which  they  are  evaded 
by  the  government  in  its  sovereign  capacity 
will  claim  a  considerable  share  of  the  space 
which  I  shall  be  able  to  devote  to  the  sub- 
jects to  be  discussed  in  this  and  the  next  fol- 
lowing chapters. 

GOVERNMENTAL  GREED  OF  POWER. 

There  seems  to  be  something  in  the  na- 
ture of  sovereignty  which  produces  in  the 
sovereign  a  certain  greed  of  power  and  of 
the  things  that  make  for  power  in  various 
forms.  Another  quality  manifested  no  less 
by  popular  than  by  monarchial  sovereigns, 
is  a  disposition  to  ignore  or  disregard  the 
rights  of  the  individual  subject  or  citizen, 
when  the  recognition  of  those  rights  would 
operate  to  impede  or  prevent  the  enlarge- 
ment of  the  sovereign  power.  Anciently, 
in  monarchial  forms  of  government,  the 
King  was  the  sovereign,  and  he  exercised 
despotic  sway  over  all  his  subjects.  Yet 
even  in  an  absolute  monarchy  there  were 
certain  rights  which  belonged  to  the  sub- 
jects, and  which  the  sovereign  might  not 
violate  with  impunity. 


THE  RIGHTS  OF  PROPERTY    223 

This  was  the  case  in  the  reign  of  King 
John  of  England,  who  had  gone  to  greater 
lengths  than  his  predecessors  in  violating 
the  hereditary  rights  of  the  nobility  of  the 
realm,  until  the  latter,  assembled  at  Runny- 
mede  in  the  year  1215,  forced  from  the  King 
the  instrument  known  as  the  Magna 
Charta,  or  Great  Charter  of  Liberties, 
whereby  the  King,  for  himself  and  his  suc- 
cessors, solemnly  agreed  thenceforth  and 
forever  to  observe  and  respect  certain  des- 
ignated rights  and  privileges  of  the  nobility 
and  free  yeomanry  of  the  realm.  So  lightly, 
however,  were  these  promises  held,  and  so 
easily  forgotten  when  the  occasion  arose  to 
evade  or  disregard  them,  that  the  succes- 
sors of  King  John  have,  on  numerous  occa- 
sions, been  called  upon  by  their  subjects  to 
reaffirm  them. 

Here  in  the  United  States,  as  in  all  other 
real  republics,  the  people  are  the  sovereign, 
and  rule  through  their  legally  constituted 
governmental  agencies.  But  though  we 
have  dethroned  the  king,  and  the  sovereign 
People  rule,  the  change,  so  far  as  the  rights 
of  property  of  the  individual  are  concerned, 
is  one  of  form  rather  than  of  substance. 
As  the  king  was  anciently  supposed  to 
reign  by  divine  right,  we  in  America  have 
attached  much  the  same  attribute  to  the 


224      OPERATIVE  OWNERSHIP 

sovereign  People,  by  our  general  accept- 
ance of  the  maxim  "Vox  Populi,  Vox  Dei" 
— "The  voice  of  the  People  is  the  voice  of 
God."  Anciently  it  was  a  maxim  that  "the 
King  can  do  no  wrong."  In  these  days  and 
in  the  United  States  the  idea  that  the  Peo- 
ple can  do  no  wrong  finds  very  general 
acceptance. 

In  their  greed  of  power,  their  inclina- 
tion to  extend  their  influence  and  activi- 
ties, and  their  readiness  to  ignore  the  rights 
of  the  individual,  the  sovereign  People  show 
their  most  striking  resemblance  to  the 
sovereign  King  of  ancient  time,  and  forces 
upon  the  mind  of  the  observer  the  convic- 
tion that  a  sovereign  is  a  sovereign  the 
world  over,  and  does  not  change  its  nature 
with  the  passage  of  time,  but  retains,  even 
in  America,  all  a  sovereign's  proneness  to 
forget  the  limitations  of  its  legitimate 
power,  and  the  rights  of  the  people  in  their 
individual  capacities. 

The  sovereign  people  of  the  United 
States  in  their  constitution,  which  is  the 
Great  Charter  of  the  liberties  and  of  the 
property  rights  of  the  individual  citi- 
zens, have  solemnly  declared  that  no  per- 
son shall  be  deprived  of  life,  liberty  or 
property,  but  by  due  process  of  law,  that 
private  property  may  not  be  taken  without 


THE  RIGHTS  OF  PROPERTY    225 

full  compensation  being  made  therefor; 
that  no  law  shall  be  passed  which  shall  have 
the  effect  of  impairing  the  obligations  of 
contracts;  and  that  the  equal  protection  of 
the  law  shall  not  be  denied  to  any  person. 
Nevertheless,  so  numerous  are  the  devices 
by  which  these  constitutional  guaranties 
are  constantly  evaded  in  the  form  of  laws 
which  enlarge  the  scope  of  the  ancient 
sovereign  prerogative  of  taxation,  the  new 
prerogative  of  police  power,  and  the  com- 
merce clause  of  the  Constitution  that  no 
one  who  has  studied  the  activities  of  our 
government  in  its  relations  to  the  individual 
citizen  can  doubt  that  the  royal  sovereign 
of  medieval  times  was  no  more  adept  at 
evading  the  limitations  of  Magna  Charta 
than  are  the  sovereign  people  of  America, 
in  their  governmental  capacity  today,  in 

evading  the  limitations  of  the  Constitution. 

i 

FORMS  OF  GOVERNMENTAL  ENCROACHMENT. 
UPON  RIGHTS  OF  PRIVATE  PROPERTY. 

The  forms  which  governmental  encroach- 
ments upon  the  rights  of  private  property 
and  private  industry  take  are  chiefly  those 
of  taxation,  the  police  power  and  regulation 
of  interstate  commerce.  A  discussion  of 
these  powers  and  of  the  manner  in  which 
they  are  being  steadily  extended  by  the  gov- 


226       OPERATIVE  OWNERSHIP 

ernment  in  derogation  of  the  rights  of  pri- 
vate property,  sufficient  in  its  scope  to  give 
an  adequate  conception  of  the  danger  to  the 
existing  social  order  which  the  continuing 
enlargement  of  governmental  powers  in- 
volves, is  scarcely  possible  within  the  al- 
lotted limits  of  the  present  chapter.  It  is 
hoped,  however,  that  enough  may  be  said 
within  those  limits  to  warn  those  who  de- 
sire the  perpetuation  of  the  present  social 
order,  with  its  rights  of  private  property 
and  private  industry,  that  the  continued 
and  progressive  enlargement  of  govern- 
mental powers,  and  the  corresponding  con- 
traction of  individual  rights,  must  inevita- 
bly result  in  the  complete  merging  of  the 
latter  in  the  government,  which  is  Social- 
ism. 

From  time  immemorial  the  right  of  pri- 
vate property  has  been  recognized  as  sub- 
ject to  certain  rights  and  powers  which  are 
considered  to  be  inherent  in  the  sovereign, 
and  have  their  origin  in  public  necessity. 
Among  the  most  important  of  these  is  the 
power  to  levy  taxes  for  the  support  of  gov- 
ernment. 

TAXATION. 

"The  power  of  taxing  the  people  and 
their  property,"  says  Chief  Justice  Mar- 
shall, "is  essential  to  the  very  existence  of 


THE  RIGHTS  OF  PROPERTY   227 

government,  and  may  be  legitimately  exer- 
cised on  the  subjects  to  which  it  is  applica- 
ble to  the  utmost  extent  to  which  the  gov- 
ernment may  choose  to  carry  it.  The  only 
security  against  the  abuse  of  this  power  is 
found  in  the  structure  of  the  government 
itself.  In  imposing  a  tax  the  legislature 
acts  on  its  constituents.  This  is,  in  gen- 
eral, a  sufficient  security  against  errone- 
ous and  oppressive  taxation.  The  people  of 
a  state,  therefore,  give  to  their  government 
a  right  of  taxing  themselves  and  their 
property;  and,  as  the  exigencies  of  govern- 
ment cannot  be  limited,  they  prescribe  no 
limit  to  the  exercise  of  this  right,  resting 
confidently  on  the  interest  of  the  legisla- 
tor, and  on  the  influence  of  the  constitu- 
ents over  their  representatives,  to  guard 
them  against  its  abuse." 

"Taxes,"  said  Justice  Ingersoll  of  the  Cir- 
cuit Court  of  the  United  States,  "are  a  por- 
tion which  each  individual  gives  of  his 
property  in  order  to  secure  and  have  perfect 
enjoyment  of  the  remainder.  .  .  .  They 
are  the  price  and  consideration  of  the  pro- 
tection afforded";  and  Montesquieu  in  his 
famous  work,  The  Spirit  of  Lcms,  (Book 
XXXI,  Ch.  1)  says:  "The  public  revenues 
are  a  portion  that  each  subject  gives  of  his 


228      OPERATIVE  OWNERSHIP 

property  in  order  to  secure  or  enjoy  the 
remainder." 

"The  subjects  of  every  state,"  says  Adam 
Smith,  in  that  Bible  of  political  economy, 
The  Wealth  of  Nations,  "ought  to  contribute 
to  the  support  of  the  government  as  nearly 
as  possible  in  proportion  to  their  respective 
abilities;  that  is,  in  proportion  to  the  rev- 
enue which  they  respectively  enjoy  under 
the  protection  of  the  state.  The  expense  of 
government  to  the  individuals  of  a  great 
nation  is  like  the  expense  of  management 
to  the  joint-tenants  of  a  great  estate,  who 
are  all  obliged  to  contribute  in  proportion 
to  their  respective  interest  in  the  estate. 
In  the  observation  or  neglect  of  this  maxim 
consists  what  is  called  the  equality  or  in- 
equality of  taxation." 

The  phrase,  "according  to  their  respective 
abilities"  as  used  by  Smith  iii  the  passage 
above  quoted,  would  be  ambiguous,  did 
he  not  make  his  meaning  clear  by  the  illus- 
tration which  he  gives,  comparing  the  ex- 
penses of  government  to  those  of  a  great 
estate  to  which  the  joint  tenants  are  "all 
obliged  to  contribute  in  proportion  to  their 
respective  interests  in  the  estate."  To  ap- 
ply the  illustration  more  directly  to  the  ad- 
measurement of  taxation,  we  may  regard 
the  aggregate  of  the  private  wealth  of  the 


THE  RIGHTS  OF  PROPERTY   229 

nation  as  one,  great  estate,  the  expense  of 
the  care  and  protection  of  which  by  the 
government  should  be  borne  by  the  owners 
"in  proportion  to  their  respective  interests 
in  the  estate." 

Upon  the  authority  of  the  very  eminent 
jurists  and  philosophers  above  quoted,  than 
whom  there  are  no  others  in  their  respect- 
ive departments  of  learning  whose  views 
are  entitled  to  greater  respect,  it  appears: 

That  taxation  is  the  price  and  considera- 
tion which  the  individual  gives  for  the  pro- 
tection which  he  receives  from  the  State  in 
the  enjoyment  of  his  liberty  and  property. 

That  the  right  of  taxation  inheres  in  gov- 
ernment as  a  necessity  of  its  existence,  and 
is  unlimited  as  to  amount  as  the  possible 
needs  of  government  are  unlimited. 

That  all  who  enjoy  the  protection  of  gov- 
ernment are  morally  bound  to  contribute  to 
its  support  in  proportion  to  their  abilities 
as  measured  by  the  amount  of  the  property 
or  revenues  which  they  enjoy  under  that 
protection. 

It  follows  that  when  taxes  are  levied  upon 
certain  groups  or  classes  of  persons  arbi- 
trarily, and  out  of  proportion  to  the  amount 
of  property  which  they  own  or  revenue 
which  they  enjoy,  with  the  result  that  the 
amount  of  their  taxes  bears  a  higher  ratio 


230       OPERATIVE  OWNERSHIP 

to  the  total  amount  of  taxes  levied  than  the 
amount  of  their  property  or  revenue  bears 
to  the  total  amount  of  taxable  property  or 
revenues,  they  are  unequally  and  unjustly 
taxed. 

The  rule  in  regard  to  the  equality  or  in- 
equality of  taxation  as  stated  by  Adam 
Smith  in  the  passage  above  quoted  from 
that  distinguished  writer  would  seem  to 
conform  to  the  most  obvious  principles  of 
justice.  It  was  applied  in  the  prevailing 
forms  of  direct  taxation  in  the  United 
States  from  the  foundation  of  the  govern- 
ment until  comparatively  recent  times. 

Contrary  to  this  rule  there  have  come  into 
vogue  of  late  years  certain  forms  of  direct 
taxation  which  affect  chiefly  the  wealthier 
classes,  as  they  were  doubtless  intended  to 
do,  in  which  no  pretense  is  made  of  any 
definite  ratio  between  the  amount  of  prop- 
erty taxed  and  the  amount  of  the  tax. 

INCOME  TAXES. 

Among  the  most  familiar  forms  of  taxa- 
tion which  exemplify  a  departure  from  the 
principle  embodied  in  the  maxim  of  Adam 
Smith,  above  quoted,  the  observation  or 
neglect  of  which,  as  he  says,  determines  the 
equality  or  inequality  of  taxation,  may  be 
mentioned  certain  forms  of  income  tax,  in- 


THE  RIGHTS  OF  PROPERTY    231 

heritance  taxes  and  taxes  on  bonds,  mort- 
gages, etc. 

A  tax  upon  incomes  has  been  held  by  the 
Supreme  Court  of  the  United  States*  to  be  a 
tax  on  the  property  from  which  the  income 
is  derived.  When,  therefore,  property  has 
been  taxed,  and  the  income  from  that  prop- 
erty is  also  taxed  by  the  same  taxing  power, 
such  income  tax  is  double  taxation.  So  it 
is  also  in  the  case  of  taxes  on  mortgages. 
When,  for  example,  one  buys  a  tract  of 
land,  paying  a  part  of  the  price  in  cash,  and 
giving  a  mortgage  to  secure  the  payment 
of  the  balance,  there  is  no  new  property  or 
value  created,  for  the  mortgage  merely  pro- 
vides, in  effect,  that  if  the  balance  of  the 
purchase  price  is  not  paid  the  property 
shall  revert  to  the  seller,  or  be  sold  to  sat- 
isfy the  debt.  If,  therefore,  the  property  is 
taxed  at  its  full  value,  and  the  mortgage  is 
also  taxed,  there  is  double  taxation  to  the 
extent  of  the  tax  on  the  mortgage.  So,  too, 
in  the  case  of  notes  or  bonds  for  the  pay- 
ment of  money.  They  are  not  property  in 
themselves,  but  promises  to  deliver  prop- 
erty in  the  form  of  money  to  the  payee  or 
holder  at  some  future  time.  If  promises 
were  property  we  might  all  be  millionaires, 

*Dobbins  vs.  Commissioners  of  Erie  County.  16  Peters, 
435. 


232T      OPERATIVE  OWNERSHIP 

but  if  we  had  to  pay  taxes  on  promises  we 
should  quickly  become  paupers. 

INHERITANCE  TAXES. 

The  taxing  of  inheritances,  is  perhaps, 
the  latest  deviation  from  the  principle  of 
proportional  taxation  which  prevailed  in 
the  United  States  during  the  first  century 
of  the  Republic.  This  form  of  taxation  is 
justified  by  its  advocates  upon  the  ground 
that  the  right  to  inherit  is  derived  from  the 
laws  of  the  State.  But  this  claim  is  with- 
out foundation  in  reason  or  in  fact.  Private 
property  is  not  the  property  of  the  State  in 
any  sense,  consequently  the  State  has  no 
moral  right  to  take  or  dispose  of  it  upon  the 
death  of  the  owner.  The  State  does  not 
give  the  inheritor  of  property  any  new 
rights  of  property  which  he  did  not  possess 
before,  but  only  recognizes  a  pre-existing 
natural  and  moral  right.  I  use  the  term 
natural  in  this  connection  in  the  sense  of 
"consonant  with  the  characteristic  instincts, 
feelings,  reasonings,  etc.,  of  human  kind; 
especially  of  social  feelings  and  sensibili- 
ties," as  defined  by  Webster. 

It  is  probable  that  the  laws  of  descent  and 
inheritance,  which  in  the  United  States  are 
in  the  main  but  a  re-enactment  of  the  Eng- 
lish Common  Law  in  that  regard,  had  their 


THE  RIGHTS  OF  PROPERTY   233 

origin,  not  as  an  act  of  the  sovereign,  in 
granting  to  the  subject  some  right  not  previ- 
ously possessed  by  the  latter,  but  as  a  ju- 
dicial act,  deciding  which  of  two  or  more 
claimants  should  be  recognized  as  possess- 
ing by  virtue  of  their  relations  to  the  de- 
cedent, the  stronger  claim  to  the  right  of 
succession  to  the  possession  of  his  property. 
One  of  the  most  ancient  of  the  functions 
that  appertain  to  the  quality  of  sovereignty 
is  the  administration  of  justice.  While  the 
common  law  was  still  in  the  formative  stage, 
when  it  consisted  of  what  Blackstone  de- 
scribes as  general  customs  which  "received 
their  binding  power  and  the  force  of  law 
from  long  and  immemorial  usage,"*  and  be- 
fore the  right  of  the  children  or  descendants 
of  a  deceased  parent  or  ancestor  to  succeed 
to  the  possessions  of  the  latter  became  rec- 
ognized as  a  legal  right,  the  courts  or  func- 
tionaries through  whom  justice  was  ad- 
ministered were  often  called  upon  to  decide 
between  rival  claimants  as  to  which  had 
the  better  right  to  such  possessions.  In 
such  cases  these  functionaries  guided  by 
"the  characteristic  instincts,  feelings,  and 
reasonings  of  human  kind,"  generally 
decided  in  favor  of  the  children  or  nearest 

*Blackstone's  Commentaries,  Book  II,  Ch.  1,  p.  11. 


234      OPERATIVE  OWNERSHIP 

relations  as  having  the  strongest  claim  to 
the  succession,  "till  at  length  in  process  of 
time  this  frequent  usage  ripened  into  gen- 
eral law." 

PROGRESSIVE  TAXATION. 

The  most  radical  deviation  from  the 
principle  of  proportional  taxation  with 
which  we  are  familiar,  occurs  in  the  form 
of  progressive  taxation;  as  where  prop- 
erty is  taxed  at  a  certain  rate  up  to  a  desig- 
nated amount  in  value  and  at  a  certain 
higher  rate  on  the  value  above  that  amount, 
up  to  a  certain  other  amount,  and  so  on; 
the  rate  increasing  progressively  with  every 
step  from  each  particular  class  to  the  next 
above. 

The  progressive  feature  in  taxation  is 
at  present  most  frequently  exemplified  in 
income  and  inheritance  taxes;  but  it  is 
susceptible  of  application  to  bonds,  real 
estate,  money  in  bank  or  almost  any  other 
form  of  property.  Indeed  in  view  of  the 
growing  tendency  of  legislative  bodies  to 
throw  the  burdens  of  government  more  and 
more  upon  the  rich,  without  regard  to  the 
principle  of  equality  or  proportion,  it  may 
be  expected  at  no  distant  day  that  the  pro- 
gressive feature  will  be  applied  to  all  kinds 
0f  taxation. 


THE  RIGHTS  OF  PROPERTY   235 

The  most  serious  vice  of  the  progressive 
principle  in  taxation  is  the  facility  with 
which  it  lends  itself  to  schemes  of  spolia- 
tion and  confiscation.  The  principle  of  pro- 
gression once  adopted  in  taxation,  there  is 
no  measure  by  which  the  rate  of  increase 
at  the  various  stages  of  progression  may 
be  determined  but  the  arbitrary  will  of  the 
legislative  body  or  other  governmental 
agency  which  imposes  the  tax;  and  while 
at  one  time  the  action  of  such  a  body  may 
be  characterized  by  moderation,  it  may 
easily  happen  that  with  a  change  of  mem- 
bership it  might  be  actuated  by  a  spirit 
radically  hostile  to  the  owners  of  large  or 
even  moderately  large  fortunes,  and  fix  the 
rate  of  the  surtaxes  at  such  a  figure  as 
would  amount  to  undisguised  confiscation. 
That  progressive  taxation  not  only  is  a 
convenient  instrument  of  confiscation  but  is 
the  means  actually  contemplated  by  Social- 
ists for  the  confiscation  of  whatever  prop- 
erty of  the  wealthy  classes  may  chance  to 
escape  confiscation  when  the  Socialistic  re- 
gime shall  be  ushered  in,  and  the  Socialist 
Commonwealth  shall  take  possession  of  all 
the  means  of  production,  distribution  and 
exchange,  is  shown  by  the  following  extract 
from  a  highly  authoritative  work  by  Mr. 


236      OPERATIVE  OWNERSHIP 

John  Spargo,  who  is  one  of  the  leading  So- 
cialist writers  of  America: 

"Finally,"  says  Mr.  Spargo,  "it  will  be 
possible  to  adopt  measures  for  eliminating 
the  unearned  incomes  entirely  by  means  of 
taxation,  such  as  the  progressive  income 
tax,  property  and  inheritance  taxes.  Tax- 
ation is,  of  course,  a  form  of  confiscation, 
but  it  is  a  form  which  has  been  familiar, 
which  is  perfectly  legal,  and  which  enables 
the  confiscatory  process  to  be  stretched  out 
over  a  long  enough  period  to  make  it  com- 
paratively easy  to  reduce  the  hardship  to 
a  minimum.  By  means  of  a  progressive  in- 
come tax,  a  bond  tax  and  an  inheritance  tax 
it  would  be  possible  to  eliminate  the  un- 
earned incomes  of  a  class  of  bond-holders 
from  society  within  a  reasonable  period, 
without  inflicting  injury  or  hardship  on  any 
human  being."* 

If  it  be  true  as  stated  by  Justice  Ingersoll 
in  the  language  before  quoted  from  that 
learned  jurist,  and  as  recognized  by  political 
economists,  that  taxes  are  "the  price  and 
consideration  of  the  protection  afforded" 
by  government  to  the  owner  of  property,  it 
follows  that  taxation  out  of  proportion  to 
the  protection  afforded,  or  out  of  propor- 

*Socialism,  by  John  Spargo,  2nd  Ed.  p.  336. 


THE  RIGHTS  OF  PROPERTY   237 

tion  to  the  value  of  the  property  taxed, 
which  is  the  same  thing,  is  without  consid- 
eration, and  is  unequal  and  unjust,  to  the 
extent  of  the  excess  above  the  just  propor- 
tion of  taxes  which  the  property  should 
bear. 

When  the  owner  of  property  is  taxed  at 
a  certain  rate  on  its  value  or  income  up  to 
a  given  amount,  and  at  a  higher  rate  on 
property  or  income  in  excess  of  that  amount 
up  to  a  certain  other  amount,  and  so  on,  as 
in  progressive  taxation,  the  property  bear- 
ing the  higher  rates  receiving  no  more  pro- 
tection than  that  which  pays  the  lowest 
rate,  such  owner  receives  no  consideration 
for  the  surtaxes  which  he  is  compelled  to 
pay,  and  his  property  is  to  that  extent,  un- 
equally taxed. 

What  has  been  said  in  the  foregoing  pages 
in  regard  to  the  principle  of  proportional 
taxation  and  the  forms  of  taxation  in 
which  that  principle  is  contravened,  must  be 
understood  as  applying  only  to  taxes  levied 
for  the  expenses  of  government  in  what  may 
be  called  the  normal  condition  of  national 
affairs.  For  it  is  not  to  be  supposed  that  in 
the  always  possible  event  of  conditions  aris- 
ing which  might  threaten  or  precipitate 
some  great  national  catastrophe,  involving 
the  rights  or  liberties  of  the  people,  or  pos- 


238      OPERATIVE  OWNERSHIP 

sibly  the  very  existence  of  the  nation,  the 
government  should  be  held  to  a  nice  balanc- 
ing of  individual  rights  against  national 
needs.  In  such  a  contingency  all  rules  and 
all  theories  in  regard  to  limitations  of  gov- 
ernmental powers  must  yield,  if  need  be,  to 
that  supreme  law  which  may  be  called  the 
law  of  national  self -preservation.* 

GOVERNMENTAL  REGULATION  OF  INDUSTRY. 

The  most  flagrant  form  of  encroachment 
by  the  government  upon  the  rights  of  pri- 
vate property  is  that  of  government  regula- 
tion. We  have  seen,  in  the  beginning  of 
this  chapter,  that  the  rights  of  property 
consist  in  the  free  use,  enjoyment  and  dis- 
posal of  one's  acquisitions  without  any  con- 
trol or  diminution,  save  only  the  law  of  the 
land.  The  supreme  "law  of  the  land"  in  the 
United  States  is  the  Federal  Constitution, 
and  that  instrument  expressly  forbids  the 
taking  of  private  property  without  due 
process  of  law  or  without  compensation. 


*It  is  conceivable  that  such  conditions  may  develop  in  the 
relations  between  capital  and  labor  that,  to  hasten  a  readjust- 
ment of  those  relations  on  a  basis  of  social  justice,  it  may  be 
necessary  to  invoke  the  taxing  power,  as  a  simpler  and 
speedier,  though  less  just  method  than  the  power  of  eminent 
domain,  for  applying  pressure  to  capitalist  owners  of  inds- 
trial  establishments  to  induce  them  to  enter  into  arrange- 
ments with  their  operatives  for  joint  operation,  etc.,  as  pro- 
posed in  the  third  chapter  of  this  book. 


THE  RIGHTS  OF  PROPERTY   239 

It  has  been  declared  by  the  Supreme 
Court  of  Illinois*  and  other  high  legal  au- 
thorities, that  when  an  owner  is  deprived  of 
any  of  the  attributes  of  property,  he  is  de- 
prived of  his  property.  Now  if  in  the  ex- 
ercise of  government  regulation  the  owner 
of  property  is  deprived  of  the  free  use,  en- 
joyment or  control  of  it  without  compensa- 
tion and  due  process  of  law,  or  the  value  of 
his  property  is  impaired  or  destroyed,  he  is 
unlawfully  deprived  of  it,  and  this  is  what 
happens,  as  we  shall  see,  in  very  many  cases 
of  government  regulation. 

The  forms  of  government  regulation  with 
which  we  are  most  familiar,  (although  there 
are  others),  are  those  exercised  by  the  na- 
tional government  under  claim  of  authority 
derived  from  the  commerce  clause  of  the 
constitution,  and  by  state  governments  un- 
der what  is  called  the  police  power  of  the 
State. 

FEDERAL  REGULATION. 

The  power  conferred  by  the  Commerce 
clause  is  given  in  the  following  language: 

"The  Congress  shall  have  power  .  .  . 
to  regulate  commerce  with  foreign  nations 


*Ritchie  v.  People,  155  111.,  98. 


240      OPERATIVE  OWNERSHIP 

and  among  the  several  states,  and  with  the 
Indian  tribes.* 

The  granting  to  Congress  of  the  power  to 
regulate  commerce  with  foreign  nations 
was  the  principal  object  of  the  commerce 
clause  of  the  constitution;  and  the  power 
to  regulate  commerce  among  the  several 
states  was  regarded  by  the  f ramers  of  the 
constitution  as  merely  supplemental  to  that 
power.  It  was  said  by  Mr.  Madison  in  the 
Federalist  that  without  this  supplemental 
provision  the  great  and  essential  power  of 
regulating  commerce  with  foreign  nations 
would  have  been  incomplete  and  ineffectual, 
and  that  with  state  control  of  interstate 
commerce,  ways  would  be  found  to  load  the 
articles  of  import  and  export  during  the 
passage  through  their  jurisdictions  with  du- 
ties which  would  fall  on  the  producers  of 
the  latter  and  the  consumers  of  the  for- 
mer.f  To  prevent  such  action  by  the  sev- 
eral states  was  the  object  of  the  clause  in 
question.  This  intention  is  further  indi- 
cated by  the  following  clause  of  the  Consti- 
tution in  relation  to  the  same  matter: 

"No  tax  or  duty  shall  be  laid  on  articles 
exported  from  any  state.  No  preference 


^Constitution  of  the  United  States,  Art  I.,  Sec.  8,  Par.  18. 
tjudson  on  Interstate  Commerce,  Sec.  I. 


THE  RIGHTS  OF  PROPERTY    241 

shall  be  given  by  any  regulation  of  com- 
merce or  revenue  to  the  ports  of  one  state 
over  those  of  another;  nor  shall  vessels 
bound  to  or  from  one  state  be  obliged  to  en- 
ter, clear,  or  pay  duties  in  another."* 

ENLARGEMENT  OF  GOVERNMENTAL  POWERS  BY 
JUDICIAL   CONSTRUCTION. 

It  was  never  dreamed  by  the  framers  of 
the  Constitution,  profound  and  far-seeing 
statesmen  though  they  were,  that  the  plain 
and  simple  words  "to  regulate  commerce 
.  .  .  between  the  several  states,"  would 
ever  be  tortured  into  giving  Congress  the 
power  to  control  and  regulate  the  produc- 
tion within  the  several  states  of  articles 
which  might  become  the  subjects  of  inter- 
state commerce,  nor  to  control  the  relations 
which  might  subsist  between  persons  en- 
gaged in  such  production  and  their  em- 
ployes, as  has  been  done  of  late,  even  to  the 
regulating  of  wages  and  of  hours  and  condi- 
tions of  labor,  as  well  as  to  a  thousand  other 
details  of  production  and  distribution,  the 
power  to  regulate  which  is  claimed  and  ex- 
ercised by  the  national  government  under 
the  commerce  clause  above  quoted. 

But  the  art  of  legislation  by  judicial  con- 
struction, if  not  altogether  unknown  in  the 

*Judson  on  Interstate  Commerce,  Art.  I.,  Sec.  9,  Par.  5. 


242       OPERATIVE  OWNERSHIP 

days  of  the  f ramers  of  the  constitution,  had 
not  developed  into  the  fine  art  that  it  is  to- 
day. It  is  by  this  means  that  courts  are  able 
to  read  into  laws  and  constitutions  things 
which  the  f  ramers  thereof  never  thought  of 
putting  into  them,  and  powers  which  the 
people  never  conferred  upon  their  govern- 
ments, state  or  national,  are  assumed  by 
these  agencies,  and  exercised  in  derogation 
of  the  personal  and  property  rights  of  the 
people  in  their  individual  capacities,  in  the 
face  of  constitutional  provisions  guaran- 
teeing those  rights.  Thus  it  is  that  the 
power  to  regulate  commerce  among  the  sev- 
eral states  has  been  expanded  so  as  to  bring 
under  federal  control  and  regulation,  at  the 
discretion  of  the  government,  the  means  of 
production  and  distribution  of  practically 
every  commodity  produced  in  the  United 
States.  For  thefe  are  few  of  the  products 
of  industry  which  may  not,  in  one  way  or 
another,  become  subjects  of  interstate  com- 
merce. 

THE  SHERMAN  ANTI-TRUST  ACT. 

Under  this  power  Congress  passed  the 
Interstate  Commerce  Act,  with  its  numer- 
ous amendments  under  the  operation  of 
which  the  railways  have  been  brought 
under  federal  regulation,  with  the  results 


THE  RIGHTS  OF  PROPERTY    243 

which  we  have  seen  in  an  earlier  part  of  this 
book,  and  of  which  more  will  be  said  in  the 
next  chapter.  Under  this  power  also  there 
was  passed  by  Congress  a  law,  which  has 
become  known  as  the  Sherman  Anti-trust 
Act,  forbidding  all  contracts  or  combina- 
tions in  restraint  of  trade  and  forbidding 
any  person  "to  monopolize  or  attempt  to 
monopolize  any  part  of  the  trade  or  com- 
merce" between  any  state  or  territory  and 
any  other  state  or  territory. 

For  years  after  the  passage  of  this  act 
no  serious  attempt  was  made  by  the  gov- 
ernment to  prosecute  any  person  for  its 
violation.  One  political  party  succeeded 
another  in  the  administration  of  the  gov- 
ernment, each  in  vigorous  language  declar- 
ing its  hostility  to  trusts,  yet  seeming  to 
realize,  under  the  responsibility  of  govern- 
ment, that  the  so-called  trusts  were  a  nat- 
ural and  a  necessary  development  of  mod- 
ern industry;  that  the  production  of  com- 
modities on  the  scale  demanded  by  modern 
industrial  conditions  necessitated  large  ag- 
gregations of  capital ;  that  the  partial  elim- 
ination or  restriction  of  competition  prac- 
ticed by  these  organizations  was  necessary; 
and  that,  if  these  advantages  were  to  be 
denied  to  American  industries,  the  latter 
would  be  unable  not  only  to  compete  in 


244      OPERATIVE  OWNERSHIP 

foreign  markets  with  the  products  of  other 
nations  where  industry  was  not  thus  handi- 
capped, but  would  be  unable  to  hold  their 
own  in  the  home  market,  against  foreign 
competition,  unless  protected  by  an  exces- 
sively burdensome  tariff. 

The  politicians  of  both  parties  vied  with 
each  other  in  the  bitterness  of  their  de- 
nunciation of  the  trusts,  and  succeeded  in 
producing  such  a  feeling  of  hostility  to- 
ward them  that  the  government  was  com- 
pelled to  take  action  against  them  under 
the  Sherman  Act  A  few  of  the  trusts, 
moreover,  had  taken  advantage  of  the 
power  of  their  great  wealth  to  raise  prices 
or  to  resort  to  unfair  methods  of  compe- 
tition, and  afforded  just  grounds  for  visit- 
ing upon  those  particular  trusts  the  penal- 
ties of  the  law. 

One  of  the  most  serious  faults  of  the 
Sherman  Law  was  the  vagueness  with 
which  certain  offences  were  defined  to 
which  it  attached  severe  penalties.  What, 
for  instance,  would  constitute  a  restraint 
of  trade  was  largely  a  matter  of  opinion, 
upon  which  any  two  persons  might  well 
differ.  Upon  this  question  even  the  courts 
have  never  been  able  to  agree.  Yet,  under 
the  Sherman  Law,  every  merchant  or  manu- 
facturer engaged  in  interstate  commerce 


THE  RIGHTS  OF  PROPERTY    245 

must  decide  it  for  himself,  and  decide  it,  not 
according  to  any  recognized  standard,  (for 
there  is  none),  but  according  to  the  views 
of  the  court  or  judge  who  may  be  called 
upon  later  to  pass  judgment  on  the  ques- 
tion. An  error  of  judgment  might  make 
his  act  a  crime  punishable  by  heavy  penal- 
ties, without  any  intent  on  his  part  to  vio- 
late the  law. 

VENERABLE  TRADITIONS  VIOLATED. 

From  the  earliest  times  of  English  juris- 
prudence, (upon  which  our  own  is  based), 
a  criminal  intent  has  been  deemed  to 
be  an  essential  element  of  every  crime. 
But  men  have  been  convicted  of  crime  un- 
der the  Sherman  Act  who  had  no  thought 
that  their  acts  could  be  of  a  criminal  na- 
ture. Shortly  after  the  passage  of  the  act 
the  parties  to  what  was  known  as  the 
"Wire  Rope  Pool"  consulted  Senator  Hoar 
of  Massachusetts,  one  of  the  framers  of 
the  act  in  question,  as  to  whether  or  not 
their  manner  of  doing  business  was  con- 
trary to  law.  Mr.  Hoar,  who  was  a  lawyer  of 
exceptional  ability,  and  who  as  one  of  its 
framers,  may  be  supposed  to  have  known 
the  intent  and  legal  effect  of  the  Sherman 
Act  if  any  one  did,  advised  them,  in  a  very 
elaborate  opinion,  that  their  method  of  do- 


246      OPERATIVE  OWNERSHIP 

ing  business  in  no  way  conflicted  with  the 
provisions  of  the  Sherman  Act.  Yet  they 
were  afterwards  prosecuted  by  the  govern- 
ment and  declared  to  be  guilty  of  its  viola- 
tion. 

Capital  is  notoriously  timid.  With  such 
a  law  hanging  over  them  it  is  little  wonder 
that  men  of  large  affairs  proceed  cautious- 
ly and  hesitatingly,  or  omit  altogether 
many  legitimate  methods  of  extending 
their  business  operations,  through  fear 
that  their  activities  may  be  construed  to 
be  "in  restraint  of  trade,"  and  may  be  visit- 
ed with  disastrous  consequences  at  the 
hands  of  the  government.  Many  concerns, 
though  innocent  of  intentional  violation  of 
the  law,  have  been  compelled  to  pay  out  in 
their  defense,  enormous  sums,  besides 
which  their  responsible  managers  have 
been  subjected  to  anxiety  and  humiliation 
not  to  be  measured  in  terms  of  money.  To 
be  big  and  successful  seemed  to  be  a  sure 
way  of  attracting  the  "regulative"  atten- 
tions of  the  government. 

REGULATION  RUNNING  RIOT. 

As  if  the  Interstate  Commerce  Commis- 
sion, the  forty-odd  state  railway  commis- 
sions or  boards,  the  Sherman  Anti-trust 
law,  and  some  hundreds  of  state  regula- 


THE  RIGHTS  OF  PROPERTY    247 

tions,  were  not  enough  in  the  way  of  gov- 
ernment regulation  of  business,  we  have 
the  new  Federal  Trade  Commission,  with 
powers  more  far-reaching  than  those  of  any 
other  similar  governmental  agency  here- 
tofore established. 

This  commission  is  given  the  broadest 
inquisitorial  powers,  and  may  pry  into  the 
private  business  affairs  of  any  corporation 
engaged  in  interstate  commerce,  and  make 
them  a  matter  of  record,  as  part  of  their 
proceedings.  While  there  have  not  as  yet 
been  any  judicial  constructions  as  to  the 
full  extent  of  its  powers,  it  is  understood 
that  the  commission  has  power  under  the 
law,  in  certain  contingencies,  to  fix  the 
price  and  the  terms  of  distribution  of 
industrial  products.  In  short,  much  the 
same  powers  which  the  Federal  Reserve 
Board  has^over  banks,  and  which  the  Inter- 
state Commerce  Commission  has  over  rail- 
ways, the  Federal  Trade  Commission  has 
over  all  other  businesses,  except  these. 


CHAPTER  VII. 

DISAPPEARING  RIGHTS  OF  PROP- 
ERTY—(Continued). 

THE  POLICE  POWER. 

All  the  powers,  and  more  besides,  which 
the  national  government  exercises  under 
the  commerce  clause  within  the  several 
states  in  the  regulation  of  industry,  the 
states  exercise  under  the  police  power.  This 
power  may  be  defined  as  the  power  of  the 
state  to  make  and  enforce  laws  and  regula- 
tions to  promote  the  health,  safety,  morals, 
convenience  and  general  welfare  of  the  com- 
munity. It  is  declared  by  the  Supreme 
Court  of  Illinois*  to  be  an  attribute  of  sov- 
ereignty. 

When  the  average  person  hears  mention 
made  of  the  "police  power"  he  quite  natur- 
ally supposes  it  to  refer  to  the  power  of  the 
police  to  make  arrests,  to  preserve  the  peace, 
and  such  like  functions.  But  these,  as 
we  shall  see,  are  but  a  very  small  part  of 
what  is  comprised  in  the  "police  power" 


^Chicago  v.  Bowman  Dairy  Co.,  234  111.,  294, 

248 


THE  RIGHTS  OF  PROPERTY   249 

as  that  term  is  defined  by  the  courts. 
"We  hold,"  said  Justice  Harlan,  in  a  recent 
decision  of  the  United  States  Supreme 
Court,  "that  the  police  power  of  a  state  em- 
braces regulations  designed  to  promote  the 
public  convenience  or  the  general  prosperity 
as  well  as  regulations  designed  to  promote 
the  public  health,  the  public  morals  or  the 
public  safety."* 

MENACE  OF  POLICE  POWER. 

It  is  in  the  broader  sense  above  mentioned 
by  the  court, — in  the  sense  of  "regulations 
designed  to  promote  the  public  convenience 
and  the  general  prosperity,"  that  the  police 
power  will  be  discussed  in  this  chapter.  For 
in  that  sense  the  police  power  affects  the 
property  rights  of  the  individual  citizen 
more  directly  and  more  vitally  than  does 
any  other  attribute  that  appertains  to  the 
sovereignty  of  the  state,  except  perhaps  the 
taxing  power.  In  the  improper  exercise  of 
the  police  power  lies  the  most  serious  men- 
ace to  the  rights  of  property  which  con- 
fronts the  American  property  owner  today. 

To  the  exercise  of  the  police  power  as  a 
means  of  promoting  the  public  comfort  and 
convenience,  and  the  general  welfare  of  the 

*C,  B.  &  Q.  R.  R.  v.  Illinois,  200  U.  S.,  561. 


250      OPERATIVE  OWNERSHIP 

state,  there  is  one  fatal  objection,  namely: 
that  it  permits  the  taking  of  private  prop- 
erty for  public  use  without  compensation 
or  due  process  of  law.  "By  this  general  po- 
lice power  of  the  state,"  says  Justice  Cooley, 
"persons  and  property  are  subjected  to  all 
kinds  of  restraints  and  burdens  in  order 
to  secure  the  general  comfort,  health  and 
prosperity  of  the  state." 

A   CREATURE  OF  THE  COURTS. 

The  term  "police  power,"  as  also  the  thing 
to  which  the  term  has  been  applied,  is  the 
creature  of  the  courts  in  the  United  States. 
Neither  in  name  nor  in  nature,  in  the  sense 
above  defined,  did  it  exist  at  the  time  of 
the  American  revolution  or  of  the  adoption 
of  the  national  Constitution. 

When  Blackstone  published  his  commen- 
taries on  the  Laws  of  England,  a  few  years 
prior  to  the  American  revolution,  the  term 
"police  power"  was  unknown.  Among  the 
attributes  of  sovereignty  which  he  mentions 
there  is  nothing  which  bears  any  resem- 
blance to  the  thing  to  which  American 
courts  have  given  the  name  of  the  police 
power* 

The  powers  embraced  in  this  new  attri- 
bute of  sovereignty,  of  promoting  the  pub- 
lic health,  the  public  safety,  the  public  mor- 


THE  RIGHTS  OF  PROPERTY    251 

als,  and  the  general  comfort,  convenience 
and  welfare  of  the  community,  have  existed 
in  England  from  time  out  of  mind;  not 
however  as  "police  powers,"  nor  as  attri- 
butes of  sovereignty,  but  as  ordinary  func- 
tions of  government,  to  be  exercised  with 
due  regard  for  the  rights  of  private  prop- 
erty. For  while  the  government,  for  the 
general  welfare,  had  the  power  to  take 
what  it  would  of  private  property,  it  could 
only  do  so  upon  making  full  compensation 
therefor  to  the  owner.  i 

The  first  notable  case  in  which  the  right 
of  the  State  to  take  or  impair  the  value  of 
private  property  for  public  use,  to  promote 
the  "public  health,  the  public  morals,  the 
public  safety  or  the  general  welfare,"  with- 
out compensation  to  the  owner,  was  assert- 
ed, was  that  of  Trinity  Church  in  the  City 
of  New  York. 

POLICE  POWER  VERSUS  CONSTITUTIONAL  GUAR- 
ANTIES. 

In  1697  King  William  III  of  England 
granted  a  charter  of  incorporation  to  Trin- 
ity Church,  and  therein  confirmed  to  the 
corporation  a  tract  of  land  adjoining  the 
church  to  be  used  for  the  burial  of  the  dead. 
In  1823  the  corporation  of  the  City  of  New 
York  passed  a  by-law  forbidding  the  burial 


252      OPERATIVE  OWNERSHIP 

of  the  dead  in  certain  territory,  which  in- 
cluded part  of  the  land  held  by  the  church 
under  the  charter  from  the  King,  and  used 
for  the  burial  of  the  dead.  In  a  suit  in  re- 
lation to  the  matter  which  came  before  the 
Supreme  Court  of  the  State  of  New  York* 
it  was  contended  in  behalf  of  the  church 
that  the  charter  from  the  King  was  a  con- 
tract and  that  it  would  be  broken,  contrary 
to  the  constitutional  guaranty  in  regard  to 
the  inviolability  of  the  obligations  of  con- 
tracts, if  the  by-law  in  question  should  be 
enforced.  Furthermore  it  was  contended 
that  to  forbid  the  use  of  the  land  for  the 
purpose  for  which  it  had  been  fitted,  at 
great  expense,  by  the  construction  thereon 
of  costly  vaults  by  private  owners  under 
grant  from  the  church  corporation,  would 
be  a  taking  of  private  property  without  com- 
pensation in  violation  of  the  constitution. 
In  this  connection  it  must  be  understood 
that  the  Supreme  Court  of  the  United 
States,  in  the  famous  Dartmouth  College 
Case,  in  an  opinion  written  by  Chief  Jus- 
tice Marshall,  probably  the  most  illustrious1 
jurist  of  American  history,  had  previously 
held  that  a  charter  from  the  King  creating 
a  corporation  with  definite  powers,  privi- 
leges and  duties,  was  a  contract,  and  any 

*Coates  v.  Mayor  of  New  York,  7  Cowan,  585. 


THE  RIGHTS  OF  PROPERTY    253 

abridgement  by  the  state  of  the  powers  and 
privileges  thus  granted  would  be  an  impair- 
ment of  the  contract  within  the  meaning  of 
that  clause  of  the  constitution  forbidding 
the  states  to  pass  any  law  impairing  the  ob- 
ligations of  contracts. 

$  The  result  of  the  litigation,  in  the  Trinity 
Church  case,  as  tersely  stated  by  the  dis- 
tinguished American  social  and  historical 
writer,  Brooks  Adams,  was  that:  "In  the 
teeth  of  recent  precedents,  the  Supreme 
|Court  of  the  State  of  New  York  decided 
that,  under  the  police  power,  the  legislature 
of  New  York  might  authorize  this  sort  of 
appropriation  of  private  property  for  sani- 
tary purposes,  without  paying  the  owners 
for  any  loss  they  might  thereby  sustain."* 

The  doctrine  of  the  Trinity  Church  case 
was  adopted  by  other  courts,  slowly  at  first, 
and  afterwards  more  rapidly,  until  it  has 
become  fairly  well  established  as  a  principle 
of  American  law. 

The  police  power,  not  resting  upon  the 
'decision  of  any  single  court,  but  upon  many 
decisions  of  many  courts,  with  varying 
views  as  to  what  matters  come  within  the 
scope  of  its  operation,  and  the  extent  to 
which  the  powers  in  question  should  be  held 

*The  Theory  of  Social  Revolutions,  by  Brooks  Adams, 
p.  89.  - 


254      OPERATIVE  OWNERSHIP 

to  affect  the  constitutional  rights  of  prop- 
erty, there  came  to  be  in  course  of  time  such 
a  variety  of  decisions,  representing  all 
shades  of  opinion  as  to  the  scope  and  limits 
of  the  police  power,  that  whatever  view  the 
court,  in  any  given  case,  might  choose  to 
take,  though  flatly  opposed  to  some  previ- 
ous decision  involving  substantially  the 
same  state  of  facts,  it  could  find  not  one, 
but  many,  precedents  to  support  it 

Thus,  it  happened  that  about  fifty  years 
after  the  decision  in  the  Trinity  Church 
case,  another  case  occurred  in  Illinois  under 
an  identical  state  of  facts  in  all  essential 
respects,  save  that  the  charter  in  the  Illinois 
case  had  been  granted  by  the  State  of  Illi- 
nois instead  of  by  the  King,  as  in  the  New 
York  case.  But  here  the  Court  held  direct- 
ly the  opposite  to  the  New  York  decision. 

CONFLICTING  DECISIONS. 

The  conflicting  character  of  court  de- 
cisions in  cases  involving  questions  relating 
to  the  police  power  is  not  to  be  attributed 
to  the  fact  that  they  are  rendered  in  differ- 
ent jurisdictions  or  by  courts  affected  by 
varying  local  influences.  The  like  conflict 
may  be  found  in  many  cases  between  de- 
cisions of  the  same  court.  Thus  a  statute  * 
of  Illinois  providing  that:  "No  female 


THE  RIGHTS  OF  PROPERTY    255 

shall  be  employed  in  any  factory  or  work- 
shop more  than  eight  hours  in  any  one  day, 
nor  more  than  forty-eight  hours  in  any  one 
week,"  was  held  unconstitutional  as  an  at- 
tempt to  invade  the  right  of  private  prop- 
erty by  legislative  power  in  the  disguise  of 
a  police  regulation.*  A  few  years  later  an- 
other law  was  passed  in  the  same  state  pro- 
viding that:  "No  female  shall  be  employed 
in  any  mechanical  establishment,  factory 
or  laundry  more  than  ten  hours  in  any  one 
day."  Although  no  question  was  raised  in 
regard  to  the  difference  in  the  number  of 
hours  which  a  female  might  be  employed, 
the  second  law  was  held,  by  the  same  court, 
to  be  a  proper  exercise  of  the  police  power, 
and  therefore  valid.** 

Such  conflicts  are  inevitable  when  the 
subject  of  the  decision  is  a  power  which 
rests  not  upon  any  constitutional  provision 
or  legislative  enactment,  but  upon  the  un- 
controlled discretion  of  the  court  in  each 
particular  case.  Rights  of  persons  or  prop- 
erty held  at  the  unlimited  discretion  of  a 
court  are  held  by  a  precarious  and  uncertain 
tenure.  Certainly  they  are  not  held  with  the 
security  contemplated  by  the  f ramers  of 
the  constitution. 


*Ritchie  v.  People,  156  111.,  98. 
**Ritchie  v.  Wayman,  244  111.,  509. 


256       OPERATIVE  OWNERSHIP 

CHARGES  OF  JUDICIAL  BIAS. 

The  judicial  discretion  which  is  the  Mfe 
principle  of  the  police  power,  is  become  the 
cause  of  no  little  embarrassment  to  the 
courts,  in  the  sense  that  they  often  find 
themselves  at  their  wits'  end  in  the  effort 
to  reconcile  conflicting  decisions  rendered 
upon  the  same  question,  by  the  same  court, 
,  at  different  times.  The  long  line  of  decisions 
which  each  litigant  is  able  to  cite  in  support 
of  its  contention,  in  any  case  involving  the 
question  whether  a  given  legislative  or  ex- 
ecutive act  is  void  as  a  violation  of  the  con- 
stitutional safeguards  of  the  rights  of 
property  and  person,  or  valid  as  a  proper 
exercise  of  the  police  power,  brings  to  the 
defeated  party,  and  the  class  which  such 
party  represents,  the  conviction  that  only 
the  bias  of  the  court  could  bring  it  to  disre- 
gard so  formidable  a  line  of  precedents. 
The  result  of  this  conviction  is  that  the 
charge  of  bias  is  often  made  against  the 
courts,  on  the  one  side  by  advocates  of 
"progressive"  legislation,  and  on  the  other 
by  the  representatives  of  the  interests  ad- 
versely affected  by  such  legislation,  and  the 
bias,  real  or  imagined,  of  the  courts  against 
"progressive"  legislation  as  charged  by  the 
advocates  of  such  legislation  has  been  made 
the  basis  of  a  demand  for  the  recall  of  ju- 


THE  RIGHTS  OF  PROPERTY    257 

dicial  decisions  in  cases  involving  the  exer- 
cise of  the  police  power. 

On  the  other  hand,  in  refutation  of  the 
charge  of  bias  against  "progressive"  legis- 
lation, so  far  as  that  charge  is  made  with 
reference  to  the  United  States  Supreme 
Court,  Mr.  Charles  Warren,  formerly  As- 
sistant United  States  Attorney-General, 
published  an  article  in  the  Columbia  Lwu 
Review,  in  April,  1913,  in  which  he  shows 
by  a  careful  enumeration  and  classification 
of  all  the  cases  decided  by  the  Supreme 
Court  during  the  twenty-five  year  period, 
from  1887  to  1911,  inclusive,  that  "out  of 
over  560  state  statutes  or  other  forms  of 
State  action  adjudicated  under  the  'due  pro- 
cess' and  'equal  protection'  clauses  .  .  .  the 
Court  has  upheld  over  530,  it  has  held  in- 
valid only  three  relating  to  'social  justice/ 
and  only  thirty-four  relating  to  private 
rights  of  property." 

NO  BIAS  AGAINST  "PROGRESSIVE"  LEGISLATION. 

Commenting  on  the  showing  of  the  court 
in  the  smallness  of  the  number  of  cases  in 
which  the  restrictions  of  the  constitution 
under  the  "due  process"  clause  were  held  to 
apply  to  legislative  acts,  Mr.  Warren  says  in 
his  article  above  mentioned:  "The  actual 
record  of  the  Court  thus  shows  how  little 


258       OPERATIVE  OWNERSHIP 

chance  a  litigant  has  of  inducing  the  Court 
to  restrict  the  police  power  of  a  state  .  .  . 
in  other  words  it  shows  the  court  to  be  a 
bulwark  of  the  police  power." 

In  a  later  article  (December,  1913)  con- 
tributed by  the  same  writer  to  the  same 
magazine,  on  the  same  general  subject,  he 
says: 

"In  other  words,  in  this  great  and  vitally 
important  class  of  cases  the  Court  has  set- 
tled the  boundary  line  which  separates  the 
end  of  the  police  power  and  the  beginning 
of  the  Constitutional  guaranties,  over- 
whelmingly in  favor  of  the  State  as  against 
the  individual. " 

"  'Due  process'  and  the  'police  power'  both 
being  indefinite  terms,  the  court  has  exer- 
cised a  wide  discretion  in  enlarging  the 
scope  of  both  in  favor  of  the  State." 
I  It  must  be  admitted,  in  view  of  the  facts 
shown  by  Mr.  Warren,  that  such  a  liti- 
gant as  he  refers  to  in  the  passage  quoted 
above  would  have  very  little  chance  indeed 
before  the  Supreme  Court. 

COURTS  INFLUENCED  BY  PUBLIC  OPINION. 

"Some  one  has  aptly  said  that  the  Su- 
preme Court  follows  the  election  returns," 
writes  a  contributor  to  the  Popular  Science 
Monthly;  and  in  view  of  the  facts  shown 


THE  RIGHTS  OF  PROPERTY   259 

by  Mr.  Warren  in  the  magazine  article  be- 
fore mentioned,  there  would  seem  to  be 
some  warrant  for  the  observation. 

Mr.  Warren,  in  a  later  contribution  to  the 
magazine  first  above  mentioned  in  which  he 
assumed  again  the  role  of  friend  of  the 
court,  says: 

"The  tendency  of  the  present-day  mind 
is  unquestionably  to  tolerate  increased  re- 
striction of  the  individual  by  the  state  in 
the  interest  of  the  general  public  welfare. 
It  is  highly  important,  therefore,  that  the 
layman  should  comprehend  how  far  the 
courts  are  embodying  in  their  decisions  this 
tendency." 

Mr.  Justice  Holmes  of  the  Federal  Su- 
preme Court  in  delivering  the  opinion  of 
the  Court  in  what  are  known  as  the  Okla- 
homa Bank  Guaranty  cases,*  said :  "It  may 
be  said  in  a  general  way  that  the  police 
power  extends  to  all  great  public  needs. ... 
It  may  be  put  forth  in  aid  of  what  is  sanc- 
tioned by  usage,  or  held  by  prevailing  mor- 
ality or  strong  and  preponderant  public 
opinion  to  be  greatly  and  immediately 
necessary  to  the  public  welfare." 

In  these  words  of  Justice  Holmes,  though 
but  recently  uttered,  he  states  a  rule  which 

\  *Noble  State  Bank  v.  Haskell,  219  U.  S.  104. 


260       OPERATIVE  OWNERSHIP 

has  been  applied  on  several  historical  oc- 
casions in  this  country. 

It  means  that  whenever  "preponderant 
public  opinion"  demands  any  specific  "re- 
form" or  change  in  the  law,  the  police  pow- 
er of  the  state  may  be  invoked  to  accom- 
plish the  desired  change;  and  however 
much  private  property  may  be  taken,  de- 
stroyed, or  impaired  in  value,  the  constitu- 
tional guaranties  in  regard  to  the  rights  of 
private  property  become  dead  letters,  and 
the  police  power,  to  whatever  extent  pre- 
ponderant public  opinion  expressed  in  the 
form  of  legislative  enactments  may  hold  it 
to  be  "greatly  and  immediately  necessary  to 
the  public  welfare,"  becomes  the  supreme 
law. 

Many  will  say  this  is  as  it  ought  to  be — 
that  private  rights  should  yield  to  the  pub- 
lic welfare  as  indicated  by  "preponderant 
public  opinion"  expressed  in  legislative 
acts. 

But  public  opinion  is  variable,  uncertain, 
fluctuating.  As  a;  criterion  of  human 
rights  history  brands  it  as  the  most  treach- 
erous that  may  be  conceived,  for  it  has 
justified  every  crime  ever  perpetrated  by 
the  many  against  the  few,  with  instances 
of  which  history  teems.  It  has  lit  the  fag- 
gots of  intolerance  and  persecution,  and 


THE  RIGHTS  OF  PROPERTY   261 

given  countenance  to  innumerable  crimes 
against  the  natural  as  well  as  the  social 
rights  of  man.  It  is  only  when  guided  itself 
by  an  enlightened  sense  of  justice,  and 
guarded  against  hasty  and  unconsidered 
action,  to  which  human  nature  is  prone, 
that  its  judgment,  registered  according  to 
the  forms  of  law,  is  entitled  to  considera- 
tion. Very  often,  however,  it  is  not  so 
guided;  and  very  often  also,  that  which 
passes  for  public  opinion  in  a  community  is 
merely  the  opinion  of  a  small  but  clamour- 
ous and  aggressive  minority  of  that  com- 
munity. Moreover  under  the  American 
system  of  government  it  is  not  the  function 
of  courts  but  of  legislatures  to  concern 
themselves  about  public  opinion.  In  passing 
upon  the  validity  of  a  legislative  act  the 
question  for  the  courts  to  consider  is,  not 
"Is  it  popular?"  but  "Is  it  constitutional?" 
The  former  question,  however,  would  seem, 
from  the  facts  shown  by  Mr.  Warren  in 
the  magazine  article  above  mentioned,  to 
be  the  one  that  is  uppermost  in  the  judicial 
mind. 

HOW  THE  POLICE  POWER  OPERATES. 

The  manner  in  which  the  police  power  has 
operated  upon  private  property  has  not 
been  by  a  physical  taking  in  the  sense  of 


262       OPERATIVE  OWNERSHIP 

acquiring  title  to  or  possession  of  the  thing 
taken,  but  by  imposing  some  restraint  or 
regulation  upon  the  use  of  it  by  the  owner, 
or  by  imposing  upon  the  owner  some  duty 
or  obligation  with  relation  to  it,  which  had 
the  effect  of  destroying  or  diminishing  its 
value  either  for  purposes  of  sale  or  ex- 
change or  for  profitable  use.  In  a  few  cases 
indeed,  courts  have  held  that  unless  there 
was  an  absolute  taking  of  property  there 
could  be  no  violation  of  the  constitutional 
guaranties  in  regard  to  private  property. 
But  the  overwhelming  preponderance  of  au- 
thorities reject  this  view. 

Numerous  instances  might  be  cited,  did 
space  permit,  in  which,  as  in  the  Kansas 
Brewery  Cases*  of  recent  history,  property 
which  had  been  legitimately  acquired  and 
legitimately  used,  and  which  had  paid  in 
the  form  of  taxes  for  the  protection  which, 
in  common  with  all  other  private  property, 
it  was  entitled  to  receive,  was  by  legisla- 
tive enactment,  conformably  to  the  demands 
of  "preponderant  public  opinion,"  forbid- 
den to  be  longer  used  for  the  only  purpose 
to  which  it  was  adapted,  thereby  destroy- 
ing the  value  of  the  property,  while  leaving 
the  owners  "the  empty  husks  of  title  and 

*Mugler  v.  Kansas,  123  U.  S.,  623. 


THE  RIGHTS  OF  PROPERTY    268 

possession/'  All  this  the  State,  for  the  gen- 
eral welfare,  might  properly  have  done  upon 
making  compensation  for  the  property  de- 
stroyed, which,  however,  was  not  done. 

THE  GRANGE  MOVEMENT. 

Another  notable  case  of  "preponderant 
public  opinion"  finding  expression  in  legisla- 
tive acts  and  judicial  decisions  which  have 
operated  to  greatly  enlarge  the  powers  of 
government  over  private  property  is  that 
of  the  historic  "Grange"  organization  of  the 
early  seventies  of  the  last  century.  This 
was  an  association  designed  to  promote  the 
interests  of  the  agricultural  classes.  By  its 
great  numerical  strength  and  excellent  or- 
ganization it  was  enabled  to  secure  the 
passage  of  a  number  of  laws  highly  favor- 
able to  the  farming  interests,  among  which 
were  laws  regulating  elevator  charges  and 
railway  rates.  Out  of  these  laws  arose  a 
number  of  law  suits  in  which  the  power  of 
the  legislatures  of  the  several  states  to  reg- 
ulate such  charges  was  disputed.  These 
suits  are  known  in  the  decisions  of  the  Su- 
preme Court  as  the  "Granger  Cases." 

The  question  immediately  at  issue  in  the 
Munn  case  was  the  constitutionality  of  a 


264       OPERATIVE  OWNERSHIP 

law  of  the  State  of  Illinois  fixing  the  max- 
imum rates  of  storage  for  grain  elevators 
within  the  State. 

The  elevator  in  question  was  owned  and 
operated  by  private  individuals,  and  with- 
out any  public  franchise  or  privileges  what- 
ever, but  the  Court  held  that  the  Legis- 
lature had  power  nevertheless,  without  vio- 
lating any  of  the  provisions  of  the  consti- 
tution in  regard  to  the  rights  of  private 
property,  to  fix  maximum  rates  for  such 
conveniences. 

The  ground  upon  which  the  court  based 
the  right  of  governmental  regulation  was 
that  the  elevator  business  is  a  public  em- 
ployment and  clothed  with  a  public  inter- 
est. 

The  court  held  in  effect,  that  when  the 
nature  or  magnitude  of  an  enterprise  is 
such  as  to  be  of  public  consequence  and  af- 
fect the  community  at  large,  the  owner  in 
devoting  his  property  to  such  enterprise, 
grants  to  the  public  an  interest  in  its  use, 
and  must  submit  to  be  controlled  by  the  pub- 
lic in  regard  to  charges,  and  such  other 
matters  as  the  government  shall  deem  to  be 
for  the  common  good. 

This  decision  is  one  of  the  most  impor- 
tant ever  rendered  by  an  American  court, 
not  only  as  the  first  judicial  announce- 


THE  RIGHTS  OF  PROPERTY   265 

ment  in  the  United  States  of  the  doctrine 
that  private  property  employed  by  its 
owner  in  dealings  with  the  public,  with- 
out making  use  of  any  public  property  or 
franchise  whatever,  was  subject  to  govern- 
mental regulation  as  to  rates  and  charges, 
but  also  as  announcing  for  the  first  time 
the  broader  principle  that  when  private 
property  is  used  "in  such  a  manner  as  to 
be  of  public  consequence  and  affect  the 
community  at  large"  it  is  subject  to  such 
regulation.  Not  only  is  the  doctrine  thus 
announced  the  basis  of  the  right  of  govern- 
ment regulation  of  railways,  but  it  gives 
judicial  sanction  to  governmental  regula- 
tion, not  only  in  regard  to  rates,  but  in 
various  other  ways,  of  all  industries  of  any 
public  consequence.  "That  decision,"  said 
Associate  Justice  Field,  of  the  Supreme 
Court,  referring  to  the  case  of  Munn  v. 
Illinois,  in  his  dissenting  opinion  in  one  of 
the  "Granger  Cases,"*  "will  justify  the  leg- 
islature in  fixing  the  price  of  all  articles 
and  the  compensation  for  all  services.  It 
sanctions  intermeddling  with  all  business 
and  pursuits,  leaving  the  use  and  enjoy- 
ment of  property,  and  the  compensation 
for  its  use  to  the  discretion  of  the  legis- 
lature." 

*C,  B.  &  Q.  R.  R.  v.  Iowa,  94  U.  S.,  155. 


266       OPERATIVE  OWNERSHIP 

And  thus  again  we  see  the  police  power 
of  the  State  put  forth,  in  aid  of  what  is  held 
by  "strong  and  preponderant  public  opinion, 
to  be  necessary  to  the  public  welf  are."  The 
action  of  the  legislatures  and  the  courts  in 
the  "Granger  Cases"  shows  that  if  only 
"preponderant  public  opinion"  is  sufficient- 
ly strong  and  well  organized,  the  general 
principle,  universally  recognized,  that  ev- 
ery man  may  fix  what  price  he  pleases  upon 
his  own  property  or  the  use  of  it,  will  be 
set  at  naught,  and  any  form  of  private 
property,  "when  used  in  a  manner  to  make 
it  of  public  consequence  and  affect  the 
community  at  large"  may,  under  the  doc- 
trine of  the  decision  in  the  case  of  Munn 
v.  Illinois,  be  subjected  to  regulation  as  to 
the  price  which  the  owner  may  demand  for 
such  property  or  the  use  of  it. 

A  MOMENTOUS  DECISION. 

The  decision  in  the  case  of  Munn  against 
the  People  of  the  State  of  Illinois  has  been 
aptly  described  as  "one  of  the  most  momen- 
tous ever  rendered"**  by  the  Supreme 
Court  of  the  United  States.  It  marked  an 
epoch  in  the  relations  of  the  government 
to  private  property  and  private  industry. 
The  doctrine  of  the  decision  that  "Proper- 
ty does  become  clothed  with  a  public  in- 


THE  RIGHTS  OF  PROPERTY  267 

terest  when  used  in  a  manner  to  make  it 
of  public  consequence  and  affect  the  com- 
munity at  large,"  and  thereby  becomes  sub- 
ject to  governmental  regulation  as  to  the 
price  which  the  owner  may  demand  for 
such  property  or  the  use  of  it,  is  of  so 
sweeping  a  character  that,  in  principle  it 
makes  practically  every  industry  and  busi- 
ness in  the  country  subject  to  regulation 
at  the  discretion  or  whim  of  the  legislature. 
For,  as  stated  by  Justice  Field  in  his  dis- 
senting opinion,  "there  is  no  business  or 
enterprise  involving  expenditure  to  any  ex- 
tent which  is  not  of  public  consequence, 
and  which  does  not  affect  the  community 
at  large.  There  is  no  indutsry  or  employ- 
ment, no  trade  or  manufacture  and  no  avo- 
cation which  does  not  in  a  greater  or  less 
extent  affect  the  community  at  large,  and 
in  which  the  public  has  not  an  interest  in  the 
sense  used  by  the  court"* 

The  full  significance  of  what  Justice 
Field  speaks  of  in  his  dissenting  opinion 
in  a  related  case  as  "the  novel  doctrine  an- 
nounced in  Munn  v.  Illinois,  that  the  legis- 
lature has  a  right  to  regulate  the  compen- 
sation for  the  use  of  all  property,  and  for 
services  in  connection  with  it,  the  use  of 

*Munn  v.  Illinois,  supra. 


268      OPERATIVE  OWNERSHIP 

which  affects  the  community  at  large,"  pro- 
mulgated in  the  last  above  mentioned  case 
for  the  first  time  did  not  appear  until  it 
was  realized  that  the  doctrine  applied  to 
the  railway  industry.  At  the  same  term  of 
the  Supreme  Court  at  which  the  decision 
in  Munn  v.  Illinois  was  rendered,  there 
were  also  decided  some  six  railway  cases 
arising  in  the  states  of  Illinois,  Iowa,  Wis- 
consin and  Minnesota  and  which  together 
with  the  Munn  case  are  collectively  known 
as  the  Granger  Cases,  in  which  the  ques- 
tion as  to  the  right  of  state  legislatures  to 
fix  maximum  rates  for  railway  services 
was  raised.  The  court,  applying  the  doc- 
trine above  mentioned  of  the  case  of  Munn 
v.  Illinois,  held  in  each  case  that  the  legis- 
lature had  ,such  right. 

RUINOUS   RAILWAY  REGULATION. 

Since  the  beginning  of  railway  rate  reg- 
ulation the  regulative  activities  of  govern- 
ment, state  and  national,  in  regard  to  that 
industry,  have  increased  greatly,  extend- 
ing to  matters  of  equipment,  and  manage- 
ment, which  greatly  increase  the  cost  of 
operation  and  maintenance,  as  well  as  to  a 
stricter  regulation  of  rates  and  fares  which 


THE  RIGHTS  OF  PROPERTY    269 

greatly  reduce  the  receipts  relatively  to 
these  items  of  cost  and  maintenance. 

The  consequences  of  this  grinding  of  the 
railways  between  the  upper  and  the  nether 
millstones  of  the  downward  regulation  of 
rates  on  the  one  hand,  and  the  upward  reg- 
ulation of  operative  methods  on  the  other, 
has  been  the  depreciation  of  railway  securi- 
ties, involving  a  loss  of  hundreds  of  mil- 
lions of  dollars  to  the  holders,  and  the  im- 
pairment of  railway  credit,  so  that  it  has 
been  impossible  in  many  cases  to  obtain 
new  capital  for  extensions,  betterments 
and  needed  equipment. 

TRUE  BASIS  OF  GOVERNMENTAL  RIGHT  OF 
REGULATION. 

I  am  not  to  be  understood  as  objecting 
to  the  imposition  of  proper  restraints  upon 
railways  or  any  other  industry  or  estab- 
lishment engaged  in  rendering  any  service 
or  producing  any  commodity  that  is  vital 
to  the  physical,  industrial  or  commercial 
life  of  the  community,  against  any  abuse  of 
the  privileges  enjoyed  by  such  industry 
or  establishment  at  the  sufferance  of  the 
community. 

The  supreme  privilege  enjoyed  by  all  in- 
dustries is  the  right  to  use  the  discoveries 
and  inventions  which  constitute  the  arts  of 


270       OPERATIVE  OWNERSHIP 

civilization,  and  which  enter  into  every 
modern  industrial  process.  These  arts  and 
inventions  are  the  heritage  and  the  posses- 
sion of  society  at  large.  Nor  is  this  herit- 
age the  vague  and  indefinite  thing  that  is 
often  understood  when  people  speak  of  our 
"heritage  of  civilization."  It  is  a  real  and 
substantial  proprietary  right  deducible 
from  moral  principles  which  have  found 
recognition  in  modern  times  in  the  laws  of 
nearly  all  civilized  nations,  in  relation  to 
inventions.  These  principles  are  the  right 
of  a  discoverer  or  inventor  of  any  new  art 
or  process  of  manufacture  to  the  exclusive 
use  of  his  discovery  or  invention,  and  the 
succession  of  society  at  large  to  all  the 
rights  of  the  original  discoverers  and  in- 
ventors, either  by  abandonment,  as  where 
the  secret  of  such  discovery  or  invention  is, 
actually  or  presumptively,  made  public  by 
the  inventor;  or  by  contract,  as  where  a 
patent  is  granted  to  the  inventor  guarantee- 
ing him  the  exclusive  right  to  make,  use,  or 
sell  his  invention  for  a  limited  time,  in  con- 
sideration of  his  making  public  such  secret 
so  that  the  public  may  exercise  the  rights  so 
guaranteed  to  the  inventor,  after  the  ex- 
piration of  the  patent. 

The  State,  as  the  owner,  in  trust  for  all 
members  of  society,  of  the  right  to  use  such 


THE  RIGHTS  OF  PROPERTY  271 

arts  and  inventions,  possesses  the  inalien- 
able right  to  regulate  any  industry  in  which 
they  are  used  for  private  gain,  to  the  end 
that  no  person  may  be  deprived  of  the  right 
to  enjoy  the  fruits  of  civilization  at  the  low- 
est cost  consistent  with  a  just  reward  to  the 
capital,  and  a  fair  remuneration  to  the  la- 
bor employed  in  their  production. 

This,  then,  and  not  an  imaginary  grant 
by  the  property  owner  to  the  public  of  an 
interest  in  the  use  of  his  property,  when  he 
employs  it  in  certain  lines  of  business 
"which  affects  the  community  at  large,"  is 
the  true  basis  of  the  rights  of  the  State  in 
regard  to  the  regulation  of  private  indus- 
try. Regulation  on  this  basis  should  ap- 
ply to  all  industries  and  all  establishments 
alike,  when,  and  only  when,  they  undertake 
to  lay  an  exorbitant  toll  upon  the  public 
for  the  fruits  of  civilization,  or  otherwise 
violate  that  golden  rule  of  private  proper- 
ty:  "Enjoy  your  own  property  in  such  man- 
ner as  not  to  injure  that  of  another."  When 
the  occasion  arises  the  fearless  and  im- 
partial enforcement  of  this  rule  is  as  much 
the  duty  of  the  State  as  is  the  enforcement 
of  the  rule:  "Thou  shall  not  steal." 

But  while  it  is  true  that  no  one  should  be 
denied  the  right  to  enjoy  the  fruits  of  civili- 
zation on  the  most  favorable  terms  con- 


272      OPERATIVE  OWNERSHIP 

sistent  with  a  just  reward  to  the  capital  and 
labor  employed  in  their  production,  it  is 
equally  true  that  no  person  nor  group,  not 
even  the  general  public,  have  any  moral 
right  to  demand  any  commodity  or  service 
in  the  production  or  rendering  of  which 
capital  and  labor  are  employed,  except  upon 
terms  which  admit  of  a  fair  return  for  the 
use  of  such  capital,  and  a  just  remunera- 
tion for  such  labor. 

The  hostile  attitude  of  government  to- 
wards industry  in  general,  and  in  particu- 
lar towards  industries  in  which  large  ag- 
gregations of  capital  are  employed,  mani- 
fested, as  we  have  seen,  through  unequal 
taxation,  and  excessive  regulation  by  gov- 
ernment, operates  not  only  to  deprive  the 
property  owner  of  his  property  by  impair- 
ing its  value,  but  operates  also  to  the  detri- 
ment of  the  laboring  classes  and  the  com- 
munity at  large  by  retarding  or  preventing 
the  natural  growth  of  business,  thereby 
lessening  the  demand  for  labor  which  would 
result  from  such  growth,  and  preventing 
the  increase  in  the  general  prosperity  of 
the  community  which  depends  in  large 
measure  upon  employment  of  labor. 

In  a  speech  delivered  by  former  Presi- 
dent Taft  at  the  Indiana  University  in 


THE  RIGHTS  OF  PROPERTY   273 

Bloomington,  Ind.,  in  January,   1915,  he 
said: 

"The  hostility  of  legislatures  and  Con- 
gress, consciously  or  unconsciously,  has 
come  to  be  directed  against  all  successful 
investments  of  capital,  without  descrimina- 
tion.  Nothing  is  so  timid  as  capital,  and 
nothing  is  so  easily  able  to  take  care  of 
what  it  has.  The  inquisitorial  and  nagging 
character  of  the  powers  of  commissions, 
created  for  the  close  supervision  of  cor- 
porate activities,  have  so  frightened  capi- 
tal as  to  shrink  investments  and  stop  the 
normal  expansion  in  the  business  of  the 
country." 

RETROSPECTIVE. 

Thus  we  have  seen  that  although  the 
framers  of  the  Constitution  incorporated 
into  that  instrument  all  necessary  safe- 
guards and  guaranties  for  the  preservation 
of  the  rights  of  property  and  person  of  the 
individual  citizen,  against  the  possible  en- 
croachments of  the  government  upon  those 
rights  which  they  foresaw,  the  courts, 
though  devoid  of  any  legitimate  legislative 
power,  have,  by  the  process  known  as  judi- 
cial legislation,  enlarged  the  powers  granted 
to  congress  by  the  Constitution  for  the 
regulation  of  commerce,  and  created  a 


274      OPERATIVE  OWNERSHIP 

new  prerogative  of  state  sovereignty  to 
which  they  have  given  the  name  of 
the  Police  Power,  within  the  scope  of 
which  the  Constitution  is  inoperative.  This 
power,  extending  in  the  beginning  only 
to  matters  affecting  the  health,  safety  and 
morals  of  the  community,  was  early  ex- 
tended in  its  scope,  to  embrace  all  mat- 
ters affecting  the  public  convenience  or 
the  general  welfare;  and  its  scope  is  con- 
tinually in  process  of  expansion  by  the 
courts,  so  that  the  rights  of  the  individual 
are  steadily  being  contracted.  The  obvious 
result  of  this  progressive  contraction  of  in- 
dividual rights,  and  expansion  of  the  power 
of  the  State  is  that  we  are  approaching  the 
Socialistic  ideal  in  which  the  limits  to  the 
powers  of  the  State  will  disappear,  and  the 
circle  of  individual  rights  which  the  State 
is  bound  to  respect,  will  narrow  down  to  a 
cipher. 

We  have  also  seen  that  in  the  exercise  of 
the  police  power  legislatures  are  controlled 
in  the  enactment  of  laws,  and  courts  in  the 
construction  of  them,  to  a  great  extent  by 
what  they  believe  to  be  the  "preponderant 
public  opinion"  on  the  matters  to  which  such 
laws  relate,  without  regard  to  the  question 
whether  or  not  such  laws  conform  to  the 
constitution,  the  moral  law  or  the  rights 


THE  RIGHTS  OF  PROPERTY   275 

of  the  minority.  And  we  have  still  further 
seen  that  on  at  least  two  historical  oc- 
casions when  certain  "reforms"  or  changes 
in  the  law,  involving  the  destruction  or  tak- 
ing away  of  certain  essential  attributes  of 
private  property,  contrary  to  the  express 
provisions  of  the  Constitution,  were  de- 
manded by  "preponderant  public  opinion," 
such  changes  were  made  by  legislatures  and 
approved  by  the  courts. 

From  these  facts  the  conclusion  is  ir- 
resistible that  when  public  sentiment  shall 
have  sufficiently  developed  along  the  line  of 
the  growing  tendency  of  the  times  to  de- 
mand a  greater  and  ever  greater  measure 
of  governmental  control  over  private  prop- 
erty and  private  industry,  the  things  that 
have  happened  to  the  railways  and  the  other 
regulated  industries  will  be  the  fate  of  all 
industries. 

The  sentiment  is  already  strongly  in  favor 
of  applying  to  manufacturing  and  mercan- 
tile industries  the  principle  of  government 
regulation  in  regard  to  prices,  not  merely 
to  prevent  extortion,  which  is  the  only 
valid  ground  upon  which  regulation  of 
prices  can  be  justified,  but  to  reduce  to  a 


276      OPERATIVE  OWNERSHIP 

minimum  or  utterly  abolish  the  profits  of 
accumulated  wealth,  as  advocated  by  one 
section  of  the  community;  or  to  reduce  the 
cost  of  industrial  products  to  the  consumer, 
as  urged  by  another  and  more  numerous 
class,  without  regard  to  the  rights  of  the 
capital  and  labor  employed  in  their  produc- 
tion to  just  remuneration. 

THE  CAUSE  OF,  AND  THE  REMEDY  FOR,  EXISTING 
CONDITIONS. 

We  have  seen  that  the  attitude  of  govern- 
ment towards  large  accumulations  of  wealth 
in  general,  and  towards  wealth  employed  in 
industrial  production  in  particular,  is  what 
it  is  because  it  reflects  the  hostility  of  pre- 
dominant public  opinion  towards  the  owners 
of  such  wealth.  This  hostility  in  turn  has  its 
origin  in  the  feeling  with  which  the  laboring 
classes  and  their  sympathizers,  who  consti- 
tute a  large,  well  organized  and  politically 
powerful  section  of  the  population,  regard 
the  capitalist  class.  For  they  see  in  the 
rapidly  accumulating  wealth  of  the  latter 
class,  representing  as  they  believe,  unearned 
and  therefore  unjustly  appropriated  profits 
of  the  products  of  the  laborers'  toil,  the 
cause  of  the  misery  and  wretchedness  which 
is  the  lot  of  the  average  wage-earner  under 
the  system  of  wage-capitalism. 

It  is  but  natural,  therefore,  that  the  labor- 


THE  RIGHTS  OF  PROPERTY   277 

ing  classes  should  use  their  great  voting 
power  to  place  in  the  legislatures  and  the 
courts  persons  whose  views  and  feelings 
conform  to  their  own.  It  is  natural,  also, 
that  legislators  and  judges  who  owe  their 
election  or  appointment  to  the  suffrages  or 
the  favor  of  the  laboring  classes  should 
shape  their  official  conduct,  so  far  as  their 
consciences  might  permit,  with  a  view  of 
retaining  the  favor  of  that  class.  And  it 
is  also  a  noticable  as  well  as  a  regrettable 
fact  that  in  the  shaping  of  their  official  acts 
where  the  favor  of  persons  or  classes  who 
control  or  possess  a  large  voting  power  is 
concerned,  the  consciences  of  legislators 
and  judges  often  manifest  a  remarkable  de- 
gree of  flexibility. 

The  remedy  for  these  conditions  is  social 
justice,  and  it  lies  in  the  power  of  capitalists 
themselves  to  adopt  it.  If  they  fail  to  do  this 
in  the  near  future  there  is  danger  that  it,  or 
a  more  drastic  remedy  may  be  forced  upon 
them  at  the  hands  of  government  dominated 
to  a  greater  extent  than  they  have  yet  seen 
by  hostile  public  opinion.  The  day  is  at 
hand  when  the  fundamental  rights  which 
underlie  the  mutual  relations  between  cap- 
ital and  labor  must  be  re-defined,  and  those 
relations  readjusted.  If  the  increasing  con- 
trol of  government  over  private  industry, 


278       OPERATIVE  OWNERSHIP 

with  its  inevitable  trend  toward  Socialism, 
is  to  be  checked,  such  readjustment  must 
embody  the  principles  of  industrial  democ- 
racy and  an  equitable  division  between 
capital  and  labor  of  the  produce  of 
their  joint  industrial  operations  based 
upon  the  value  of  what  they  respec- 
tively contribute  to  such  operations. 

Under  an  industrial  system  embodyirfg 
these  principles  the  capitalist  and  the  labor- 
er would  be  partners  in  a  real  sense.  Their 
interest  would  be  identical,  and  legislatures 
and  courts  desirous  of  advancing  the  inter- 
ests of  the  laboring  classes  as  well  as  their 
own  would  do  so  most  effectually  when  their 
acts  would  have  the  effect  of  restoring  and 
conserving  the  rights  of  private  property 
and  private  industry.  When  labor,  with  its 
voting  power,  ceases  to  be  hostile  to  capital, 
and  becomes  instead  its  partner  and  ally, 
then,  and  not  before,  the  agencies  of  gov- 
ernment will  cease  to  be  hostile,  and  instead 
will  recognize  and  protect  the  rights  of  pri- 
vate property  and  private  industry,  and  en- 
croachments thereon,  whether  in  the  form 
of  unjust  taxation  or  undue  governmental 
control  and  regulation,  will  cease. 


CHAPTER  VIII. 
CONCLUSION. 

ADVANTAGES  SUMMARIZED. 

The  advantages  which,  as  we  have  seen 
in  the  foregoing  chapters,  would  be  likely 
to  flow  from  the  system  of  Operative 
Ownership,  when  fully  established,  may  be 
summarized  under  two  heads,  namely:  the 
transformation  of  the  wage-earning  classes 
from  a  condition  which  is  often,  and  not 
altogether  inaptly,  designated  as  wage 
slavery,  to  one  of  industrial  independence; 
and  the  re-establishment  and  preservation 
of  the  institution  of  private  property  in  the 
position  which  it  held  through  nearly  the 
first  century  of  the  American  Republic. 

Such  a  transformation  would  involve  the 
felimination  of  Socialism  as  an  important 
social  factor;  for  the  establishment  of 
Operative  Ownership  would  bring  about  all 
that  is  practicable  and  desirable  in  the  as- 
pirations of  Socialism,  regarded  from  the 
view  point  of  the  interests  of  the  laboring 

279 


280      OPERATIVE  OWNERSHIP 

classes,  of  society  at  large,  and  in  particu- 
lar of  that  portion  of  society  which  is  at- 
tached to  the  institution  of  private  proper- 
ty, and  desirous  of  seeing  the  social,  politi- 
cal and  religious  aspects  of  the  present 
order  preserved  and  perpetuated. 

The  Socialist  workingman — the  kind  of 
people  who  form  the  great  bulk  of  the 
Socialist  party,  would  have  no  further  use 
for  Socialism,  if  he,  together  with  his  co- 
workers,  were  given  the  opportuinty  to  be- 
come the  owners,  collectively,  of  the  estab- 
lishments in  which  they  work,  with  all  the 
attributes  of  ownership,  including  freedom 
from  control  or  mastery,  save  by  them- 
selves, through  foremen  or  managers  of 
their  own  choosing,  and  with  the  certainty 
that  all  the  wealth  which  they  created 
should  be  their  own. 

However  alluring,  in  comparison  with  his 
condition  under  the  capitalistic  regime,  the 
prospect  might  seem  of  working  for  the 
Socialist  State,  with  certainty  of  employ- 
ment, plenty  to  eat,  drink  and  wear,  and 
all  the  rest  that  Socialism  promises;  the 
actual  possession,  as  his  very  own,  of  the 
means  of  producing  all  these  things,  or  the 
wealth  with  which  to  provide  them,  would 
appeal  with  incomparably  greater  force  to 


CONCLUSION  281 

the  Socialist  workingman,  than  all  the 
promises  of  Socialist  propagandists. 

Those  Socialists,  therefore,  by  whom  the 
abolition  of  capitalism,  with  all  the  evils 
that  flow  therefrom,  and  the  emancipation 
of  the  laboring  classes  from  the  condition 
to  which  they  habitually  refer  as  "wage- 
slavery,"  are  so  eagerly  desired,  and  who 
look  with  confident  expectation  to  the  day 
when  the  laborer  shall  receive  the  whole 
produce  of  his  labor,  will  not,  I  believe,  be 
slow  to  see  the  advantages  of  Operative 
Ownership  as  a  means  of  attaining  that 
end,  and  will  devote  their  energies  to  aid 
in  the  establishment  of  that  system  as  a 
means  through  which  their  expectations 
above  mentioned  may  really  be  attained. 

We  have  seen  in  an  earlier  chapter  that 
one-half  of  all  the  families  of  the  United 
States  are  entirely  propertyless,  and  it  is  a 
matter  of  common  knowledge  that  the  poor- 
er families  are  generally  the  larger.  In  the 
case  of  a  large  percentage  of  the  families 
that  possess  property,  the  extent  of  their 
possessions  is  the  dwelling  house  in  which 
they  live,  which  is  owned  by  the  head  of  the 
family.  In  the  case  also  of  many  well-to-do 
families  the  property  is  owned  by  the  head 
of  the  family.  From  these  facts,  which  in 
the  main,  are  matters  of  common  observa- 


282      OPERATIVE  OWNERSHIP 

tion,  though  not  susceptible  of  statistical 
verification,  it  may  safely  be  estimated  that 
not  to  exceed  one-third  of  the  voting  popu- 
lation of  the  United  States  are  property- 
owners.  The  other  two-thirds  are  not 
therefore  directly  affected  by  any  abuse  of 
the  taxing  power,  or  by  interference  in  or 
regulation  of  private  industry;  nor  can 
they  be  directly  affected  to  their  disadvant- 
age by  the  extension  of  governmental  act- 
ivities in  any  manner  whatever.  On  the 
contrary  they  are,  speaking  generally,  the 
beneficiaries,  in  various  ways,  of  such  act- 
ivities, many  of  which  are  undertaken  chief- 
ly for  their  benefit,  and  carried  out  by  legis- 
lative and  administrative  bodies  in  a  spirit 
of  extravagance  and  prodigality  for  which 
the  design  to  benefit  the  laboring  class  is 
given  as  a  justification. 

PATERNALISM  CARRIED  TO  EXCESS. 

The  extent  to  which  this  spirit  of  patern- 
alism is  carried,  and  the  extravagance  to 
which  it  has  led  within  the  past  fifteen  or 
twenty  years  is  reflected  in  the  increasing 
cost  of  government,  year  after  year,  dur- 
ing the  period  mentioned.  This  will  be 
readily  seen  by  any  one  who  will  take  the 
trouble  to  examine  his  receipt  of  fifteen  or 
twenty  years  ago  for  the  taxes  on  any  given 


CONCLUSION  283 

piece  of  real  estate,  and  compare  it  with 
his  latest  receipt  for  the  taxes  on  the  same 
property.  It  will  be  found  in  most  cases, 
that,  making  due  allowance  for  changes  in 
the  condition  of  the  property,  the  taxes 
have  increased  between  one  hundred  and 
two  hundred  per  cent,  or  more.  This  means 
that  from  twice  to  three  times  as  much  of 
the  rents,  issues  and  profits  of  private  prop- 
erty are  appropriated  now  in  the  form  of 
taxes,  by  state  and  municipal  governmental 
agencies,  as  was  appropriated  for  the  same 
purposes  fifteen  or  twenty  years  ago.  At 
the  same  ratio  of  increase  a  very  substan- 
tial part  of  the  income  of  property  will, 
after  a  few  years  more,  be  taken  each  year 
for  the  support  of  the  government.  That 
will  be  equivalent  to  taking  a  substantial 
part  of  the  value  of  the  property;  for  the 
measure  of  the  market  value  of  property, 
is,  ordinarily,  the  net  income  which  it  will 
yield.  Thus  the  policy  of  paternalism  which 
finds  expression  in  the  increasing  number 
and  expense  of  public  institutions,  is  yearly 
reflected  in  the  diminishing  values,  from  an 
income  producing  point  of  view,  of  all  tax- 
able property. 

And  this  condition  is  likely  to  grow 
worse,  as  the  propertyless  voter  becomes 
more  conscious  of  his  power  and  more 


284      OPERATIVE  OWNERSHIP 

thoroughly  imbued  with  socialistic  notions 
in  regard  to  the  extension  of  governmental 
activities  to  the  providing  of  all  manner 
of  comforts  and  conveniences  at  public  ex- 
pense. 

For  the  greater  the  influence  of  property- 
less  voters,  the  more  complaisant  will  be  the 
government  functionaries  who  have  to  do 
with  the  levying  and  disbursement  of  the 
taxes,  in  regard  to  providing  such  conve- 
niences and  benefits  in  numberless  variety. 
Hence  it  is  that  the  non-tax-payer  may  be 
seen  going  cheerfully  to  the  polls  to  vote  a 
tax  or  a  bond  issue,  to  be  paid  by  his  tax- 
paying  neighbor,  for  the  erection  of  some 
public  building — here  a  town  hall  to  cost  a 
half  a  million  or  a  million  dollars,  and  there, 
perhaps  a  school-house,  with  a  gymnasium, 
swimming  pool,  bath-rooms,  fraternity  and 
sorority  rooms,  dance-hall,  machinery  hall, 
workshop  and  many  other  moderately  use- 
ful, highly  ornamental,  but  for  practical 
educational  purposes,  quite  unnecessary, 
appurtenances,  at  a  cost  of  a  quarter  or 
half  a  million  dollars  to  the  tax-payers, 
when  in  each  case  a  building  of  perhaps  one- 
half  or  one-third  of  the  cost  would  have  suf- 
ficed for  all  practical  needs,  and  would  have 
been  the  limit  of  expenditure  had  the  de- 


CONCLUSION  285 

cision  of  the  question  been  left  to  those  who 
would  have  to  pay  the  cost. 

PROPERTYLESS  CLASS  BENEFICIARIES    OF    PUB- 
LIC EXTRAVAGANCE. 

If  asked  to  give  his  reason  for  voting  so 
heavy  a  burden  of  taxation  upon  his  neigh- 
bor, the  benefits  of  which  he  himself  expect- 
ed to  enjoy  without  paying  for,  the  non- 
taxpaying  voter  would  probably  answer 
that  it  would  make  work  for  the  laboring 
man;  and  in  the  case  of  the  school  house, 
the  further  answer  would  be  that  the  poor 
man's  child  is  entitled  to  the  best  that  is 
going  as  well  as  the  child  of  the  rich  man, 
so  long  as  the  public,  (which  means  the  tax- 
paying  minority)  is  able  to  pay  for  it.  Thus 
year  after  jyear  the  activities  of  govern- 
ment are  directed  to  providing  comforts 
and  luxuries,  in  ever  creasing  measure  and 
variety,  for  the  enjoyment  of  the  many  at 
the  expense  of  the  few. 

Under  a  regime  of  Operative  Ownership, 
whether  partial  or  complete,  with  the  gen- 
eral diffusion  of  wealth  which  the  owner- 
ship in  whole  or  in  part  by  the  workers  col- 
lectively, of  the  establishments  in  which 
they  work,  would  involve,  every  industrial 
worker  would  be  a  property  owner  and  a 
tax-payer;  the  non-tax-paying  voters  would 


286      OPERATIVE  OWNERSHIP 

be  a  small  minority  of  the  total  number  of 
voters,  and  the  tax-paying  voter,  then  as 
now,  would  be  slow  to  vote  a  needless  or  ex- 
cessive tax  which  he  must  help  to  pay. 
Thus  the  extravagance  and  prodigality  of 
legislative  and  administrative  bodies  would 
find  a  speedy  and  effectual  check  at  the 
hands  of  the  tax-paying  voters,  now  be- 
come strongly  predominant,  and  the  burden 
of  taxation  would  be  reduced  to  the  actual 
necessities  of  the  public  business,  and  dis- 
tributed among  a  vastly  increased  portion 
of  the  population,  and  would  thereby  be 
less  oppressive  to  those  who  should  have  to 
bear  it 

THE  WEALTHY  CLASS  THE  PREY  OF 
DEMAGOGUES. 

With  the  more  general  diffusion  of  wealth 
involved  in  the  system  of  Operative  Owner- 
ship would  come,  as  we  have  seen  in  an 
earlier  chapter,  a  more  general  recognition 
of  the  sancity  of  the  rights  of  property, 
which  quality  would  be  recognized  as  ap- 
pertaining not  only  to  the  factory  of  the 
operative-owned  industrial  establishment, 
and  to  the  land  and  live-stock  of  the  farm- 
er, but  also  to  the  bonds  and  securities  of 
the  millionaire — a  class  of  persons  now  re- 
garded as  legitimate  prey  by  every  dema- 


CONCLUSION  287 

gogue  who,  in  his  eagerness  to  pander  to 
the  antipathy  and  hatred  entertained  by  a 
certain  section  of  the  working  classes  to- 
wards the  rich,  is  ready  to  despoil  them  of 
their  riches,  by  confiscatory  methods  of 
taxation,  in  the  hope  of  gaining  the  favor 
of  that  section  of  the  working  classes  above 
referred  to.  Thus  will  the  general  adop- 
tion of  Operative  Ownership  result  in  end- 
ing the  abuses  of  the  taxing  power,  and 
bring  security  against  such  abuses  alike  to 
the  workman  and  the  millionaire. 

It  is  not,  however,  through  the  power  of 
taxation  that  the  most  serious  danger 
threatens  the  rights  of  private  property 
and  private  industry,  but  through  govern- 
mental regulation,  which  may  be  expected 
to  be  extended,  in  increasing  measure,  to 
all  industries,  if  present  tendencies  in  that 
regard  are  not  checked.  We  have  seen  the 
disastrous  results  which  have  followed  the 
excessive  regulation  of  the  railway  indus- 
try by  state  and  national  governmental 
agencies,  conformably  to  a  hostile  public 
sentiment;  and  the  like  result  must  be  ex- 
pected to  follow  in  any  other  industry  when 
it  is  subjected  to  governmental  regulation 
to  the  extent  that  the  power  to  earn  a  rea- 
sonable return  on  the  capital  invested,  after 
paying  a  fair  wage  to  labor,  not  alone  in 


288      OPERATIVE  OWNERSHIP 

years  of  average  prosperity,  but  in  years 
that  fall  below  the  average  in  that  regard, 
is  thereby  taken  from  the  owners. 

"Our  social  system,"  says  Mr.  Justice 
Moody  of  the  United  States  Supreme 
Court,  "rests  largely  upon  the  sanctity  of 
private  property;  and  that  state  or  commu- 
nity which  seeks  to  invade  it  will  soon  dis- 
cover the  error  in  the  disaster  which  fol- 
lows. The  slight  gain  to  the  consumer 
which  he  would  obtain  from  a  reduction  of 
the  rates  charged  by  public  service  cor- 
porations is  as  nothing  compared  with  his 
share  in  the  ruin  which  would  be  brought 
by  denying  to  property  its  just  reward, 
thus  unsettling  values  and  destroying  con- 
fidence." 

It  is  through  such  regulation  also  that 
manufacturing  enterprises  have  been  sub- 
jected to  the  treatment  which  former  Presi- 
dent Taft  had  in  mind  when  he  spoke  in 
January,  1915,  as  already  quoted,  of  the 
hostility  manifested  by  state  legislatures 
towards  large  and  successful  establish- 
ments, and  of  the  inquisitorial  and  nagging 
character  of  the  powers  of  commissions 
having  supervision  of  corporate  activities, 
which  have  so  frightened  capital  as  to 
shrink  investments  and  stop  the  normal 
expansion  of  business  in  the  country. 


CONCLUSION  289 

UNDUE  INTERFERENCE  IMPOSSIBLE  UNDER 
OPERATIVE  OWNERSHIP. 

Such  interference  of  the  government  in 
private  industry  could  not  happen  under  a 
regime  of  Operative  Ownership.  It  hap- 
pens now  only  because  legislators  and  mem- 
bers of  congress  reflect  the  hostility  to  big 
business  which  prevails  among  the  laboring 
and  agricultural  classes,  which  are  possess- 
ed of  great  voting  power,  whereas  the  vot- 
ing power  of  the  capitalist  class  is  insigni- 
ficant. If,  instead  of  being  owned  by  a  com- 
paratively few  capitalists  the  manufactur- 
ing industries  of  the  country  were  owned 
by  the  millions  of  operatives  who  work  in 
them;  or  even  if  there  existed  a  co-partner- 
ship arrangement  between  the  capitalist 
owners  and  the  operatives,  such  as  has  been 
proposed  in  an  earlier  chapter  of  this  book, 
as  the  first  stage  of  the  proposed  process  of 
transition  from  wage-capitalism  to  com- 
plete Operative  Ownership,  there  would  be 
such  an  association  of  capital  and  voting 
power  as  would  secure  for  manufacturing 
industries  the  same  immunity  from  gov- 
ernmental interference  as  the  farming  in- 
dustry now  enjoys. 


290      OPERATIVE  OWNERSHIP 

LACK  OF  VOTING  POWER  THE  REAL  CRIME  OF 
BIG  BUSINESS. 

It  is  the  lack  of  voting  power  which  leaves 
capital  employed  in  industries  other  than 
agricultural  and  horticultural  at  the  mercy 
of  the  demagogues  who  seem  to  constitute 
a  majority  of  the  legislative  bodies  of  the 
country,  and  who  are  ready  to  advance  their 
private  interests  and  ambitions  by  sacrific- 
ing the  rights  of  property  of  the  capitalist 
class,  in  pandering  to  the  prejudices  of  the 
populace,  which  prejudices  they  also  help 
to  create.  The  real  crime  of  "Big  Busi- 
ness" is  its  lack  of  voting  power. 

Under  the  operation  of  the  Sherman 
Anti-Trust  Law  and  amendments  thereto, 
combinations  of  capital,  which  by  some  pos- 
sibility may  be  used  to  raise  the  prices  of 
commodities  (whether  justly  or  unjustly 
the  law  does  not  seem  to  regard  as  mate- 
rial) are  forbidden  under  severe  penalties. 
Similar  provisions  have  been  incorporated 
in  the  laws  of  many  of  the  states.  Many  of 
these  laws  contain  provisions  which  ex- 
pressly exempt  from  their  operation  com- 
binations of  farmers  for  the  avowed  pur- 
pose of  raising  the  prices  of  farm  products, 
and  combinations  of  laborers  for  the  pur- 
pose of  raising  wages.  Thus  while  the 
farmers  or  planters  may  combine  to  raise 


CONCLUSION  291 

the  price  of  cotton,  and  the  factory  oper- 
atives may  combine  to  raise  the  wages  of 
labor,  the  textile  manufacturers  into  whose 
product  the  factors  of  cotton  and  labor 
enter,  may  not  combine  to  raise  the  price  of 
their  products  without  incurring  the  heavy 
penalties  of  the  law.  So,  too,  farmers  may 
freely  combine  to  fix  the  price  of  wheat; 
and  the  milling  company's  employees  may 
combine  to  fix  the  rate  of  their  wages  for 
making  the  wheat  into  flour;  but  if  the  mill- 
ing companies  combine  to  fix  the  price  of 
flour  they  are  liable  to  prosecution  for  vio- 
lation of  the  anti-trust  laws. 

EQUALITY  OF  RIGHTS   CONTINGENT  UPON 
VOTING  POWER. 

The  lesson  afforded  by  this  condition  of 
affairs  is  so  simple  and  plain  that  it  scarce- 
ly needs  to  be  pointed  out.  If  capitalists 
would  secure  to  themselves  that  equality  of 
rights  which  the  constitution  guarantees, 
but  which  the  law  denies,  they  must  asso- 
ciate themselves  with  voting  power.  This 
they  may  do  by  allying  themselves  with  la- 
bor in  such  a  way  that  the  laborer  will  have 
a  direct  and  substantial  interest  in  the  cap- 
ital, or  in  the  use  of  the  capital,  and  in  the 
product  of  the  joint  operations  of  capital 
and  labor — such  an  alliance  as  would  em- 


292      OPERATIVE  OWNERSHIP 

body  the  principles  of  joint  operation  or 
joint  ownership  as  explained  in  an  earlier 
chapter  of  this  book. 

With  the  millions  of  wage  earners  at 
present  employed  in  the  various  industries 
of  the  United  States  transformed  into  own- 
ers of  the  factories,  railways  and  mines  in 
which  they  work;  or  even  into  partners  of 
the  owners,  in  the  manner  before  describ- 
ed, there  would  be  no  more  interference 
with  those  industries  by  governmental 
agencies  than  there  is  now  with  the  indus- 
try of  farming;  or  than  there  was  in  all 
industries  during  the  first  century  of  the 
Republic,  before  society  became  saturated 
with  socialistic  notions  in  regard  to  the 
insignificance  of  individual  rights  and  the 
omnipotence  of  the  state. 

WEALTH  SECURE  UNDER  OPERATIVE  OWNER- 
SHIP. 

Thus,  under  a  regime  of  Operative 
Ownership  would  private  industry  be  secure 
from  unreasonable  government  interfer- 
ence. The  laboring  classes,  no  longer  the 
propertyless  beneficiaries  of  the  spoliation 
of  the  propertied  classes,  but  transformed 
into  property-owners  and  tax-payers,  would 
guard  their  newly  acquired  rights  so  jeal- 
ously that  the  institution  of  private  proper- 


CONCLUSION  293 

ty  in  every  form  would  find  in  them  its 
most  staunch  supporters.  Legislatures  and 
courts,  which  now  regard  the  rights  of 
property  so  lightly,  as  compared  with  the 
sovereign  prerogatives  of  taxation  and  the 
police  power,  would  find  it  necessary  to  re- 
vise their  views  in  that  regard,  and  to  shape 
their  actions  to  conform  to  the  altered 
status  of  the  institution  of  private  property 
in  the  popular  regard ;  and  the  agitator  and 
the  demagogue,  who  now  find  wealth  and 
perferment  in  exciting  the  hostility  of  the 
propertyless  majority  against  the  proper- 
tied minority,  and  in  particular  against 
"big  business,"  would  find  their  occupations 
gone. 

CONCLUSION. 

If  the  facts  stated  and  the  conclusions 
drawn  therefrom  in  the  foregoing  pages 
are  correct — and  I  believe  they  can  not  be 
successfully  disputed — it  behooves  the  capi- 
talist class,  if  they  are  as  wise  and  far-see- 
ing as  they  are  reputed — and  I  believe  justly 
— to  be,  without  waiting  either  for  legisla- 
tion to  compel  them  to  do  so,  if  they  wish 
to  remain  in  business,  or  for  the  further 
development  of  Socialistic  tendencies  in 
legislation,  to  inaugurate  a  movement  for 
the  general  and  voluntary  adoption  of  a 


294      OPERATIVE  OWNERSHIP 

system  of  joint  operation  and  joint  owner- 
ship of  industrial  establishments  somewhat 
along  the  lines  suggested  in  the  foregoing 
chapters.  Not  only  would  a  true  concep- 
tion of  social  justice,  but  their  own  inter- 
ests, and  the  interests  of  the  propertied 
classes  in  general,  prompt  them  to  that 
course. 

For  the  Socialistic  spirit  which,  as  its  ad- 
vocates hope,  will  ultimately  abolish  all 
private  property  in  productive  wealth,  is 
finding  expression  in  increasing  measure 
with  each  succeeding  year  in  legislation 
bringing  private  industry  more  and  more 
under  the  control  of  government,  and  mak- 
ing capital  less  profitable  and  less  secure. 

The  weakness  of  capital  in  its  relations 
to  government  lies,  as  we  have  seen,  in  its 
lack  of  voting  power.  In  this  regard  labor 
is  strong  and  is  capable  of  supplying  to 
capital,  by  a  union  of  interests,  that 
strength  which  the  latter  lacks,  and  which 
it  sorely  needs. 

Time  was  when  capital  was  able  to  con- 
trol, in  large  measure,  the  voting  power  of 
labor.  That  time  is  past.  The  sceptre  of 
political  power  has  passed  from  the  hands  of 
capital,  and  will  never  be  restored  except 
by  such  a  union  of  its  interests  with  those 


CONCLUSION  295 

of  labor  that  an  injury  to  either  will  be  an 
injury  to  both. 

By  according  justice  and  fair  play  to  la- 
bor, capital  will  be  enabled  to  demand  and 
to  enforce  justice  and  fair  play  at  the  hands 
of  government. 

It  is  the  part  of  wisdom  for  capital  to  be 
content  with  smaller  profits,  yielding  to  la- 
bor a  larger  share  of  their  joint  products, 
and  thereby  insuring  its  moral  and  political 
support,  rather  than  have  those  profits  cut 
down  through  government  regulation. 

It  is  better  to  give  labor  a  voice  in  the 
management  of  industry  than  to  have  the 
management,  in  large  measure,  taken  over 
by  the  State  in  the  form  of  government 
regulation.  In  other  words,  it  is  wiser  for 
capital  to  share  with  labor  the  management 
and  the  profits  of  industry  than  to  have  the 
government  control  the  one  and  cut  down 
the  other. 

If  capital  will  not  take  the  hand  of  labor 
extended  in  a  spirit  of  friendly  and  interest- 
ed co-operation,  it  will  at  no  distant  day  be 
made  to  feel  the  hand  of  government  ex- 
tended in  a  spirit  of  unfriendly  regulation. 

In  the  due  consideration  and  application 
of  these  maxims  lies  the  means  for  capital 


296      OPERATIVE  OWNERSHIP 

to  forestall  the  disaster  with  which  it  is 
threatened  through  the  socialistic  spirit 
which  prevades  and  influences  in  increasing 
measure  nearly  all  classes  of  society,  and 
which  disaster  can  only  be  forestalled  and 
averted  by  a  closer  alliance  with  labor  on  a 
basis  of  identity  of  interests,  mutual  jus- 
tice, mutual  friendship  and  mutual  loyalty. 


INDEX 

A  Living  "Wage,  26. 

Adams,  Brooks,  253. 

Bank  Deposits,  guaranty  of,  by  government,  155,  156,  1S7. 

Belloc,  Hilaire,  110. 

Big  Business,  lack  of  voting  power  the  real  crime  of,  29t. 

Board,  Joint  Operative,  need  of,  179;  how  constituted,  179; 
powers  of,  179. 

Bonds,  power  to  issue,  144. 

Brooks,  Professor  John  Graham,  54. 

Capital,  only  use  of,  contributed  to  industrial  operations, 
170. 

Capital,  wages  of,  76. 

Capital  and  Labor,  mutual  needs  of,  97;  strife  between,  9S. 

Capitalism,  10,  11,  12,  19;  benevolent,  examples  of,  133; 
faults  of,  19,  20;  transition  from,  to  Operative  Owner- 
ship, 118. 

Capitalist  Theory,  fundamental  error  of,  94. 

Charter  of  Labor,  Leclaire's,  72. 

Civilization,  arts  of,  270. 

Class  Struggle,  the,  11. 

Classes,  the  war  of  the,  93. 

Classes,  working,  extreme  poverty  of,  30. 

Collectivism,  extraordinary  growth  of,  60;  the  same  ex- 
plained, 61. 

Commerce,  regulation  of,  by  Congress,  230. 

Commission,  Interstate  Commerce,  28. 

Commons,  Professor  John  R.,  43. 

Constitutional  Limitations,  139. 

Cooley,  Justice,  139. 

Co-Operation,  46,  66;  slow  progress  of,  77;  what  it  lacks,  79. 

Co-Operation,  productive,  66,  93. 

Copartnership  in  Industry,  187. 

Credit,  government,  165. 

Courts,  not  concerned  with  public  opinion,  261. 

Davies,  Emil,  59. 

Declaration  of  Independence,  50,  65. 

Division,  Equitable,  what  would  be,  between  capital  and 
labor,  167. 

Drift  and  Mastery,  192. 

Economic  Conditions,  influence  of,  in  production  of  crime, 
212. 

297 


298  INDEX 

Efficiency,  labor,  great  increase  in,  under  Operative  Owner- 
ship, 195. 

Elevators,  storage  of  grain  in,  subject  to  State  regulation, 
264. 

Bliot,  Charles  W.,  84,  85,  87. 

Ely,  Richard  T.,  18. 

Eminent  Domain,  116,  135-139. 

amployment,  uncertainty  of,  34,  206. 

Familistere  Society  of  Guise,  73,  102,  133. 

Federal  Commission  on  Industrial  Relations,  7,  30. 

Field,  Justice,  265. 

Ford,  Henry,  211. 

Ford  Motor  Company,  211. 

Fourier,  M.,  74. 

Gaskell,  P.,  on  condition  of  the  working  classes  in  England, 
105. 

Godin,  Jean-Bap tiste  Andre,  73. 

Gompers,  Samuel,  description  of  a  living  wage  by,  25. 

Government  Aid,  114;  examples  of,  in  the  United  States, 
146,  151. 

Hegel,  on  source  of  individual  rights,  49. 

Mow  the  Other  Half  Lives,  30. 

Hunter,  Robert,  30. 

Incentives  to  Efficiency,  196. 

Income  Taxes,  230. 

Indemnity  Fund,  144,  145;  in  scheme  of  Operative  Owner- 
ship, 157,  158;  government  made  secure  by,  157. 

Individual,  The,  paramount  in  social  relations,  49;  ten- 
dency to  increasing  restrictions  of  rights  of,  259. 

Individualistic  Theory  of  Society,  49. 

Individualism,  49. 

Industrial  Production,  22. 

Industrial  Relations,  Commission  on,  7,  30. 

Industries,  government-operated,  in  Europe,  59. 

Industry,  government  regulation  of,  238,  239. 

Infant  Mortality,  33. 

Ingersoll,  Justice,  236;  on  the  nature  of  taxes,  227. 

Inheritance  Taxes,  232. 

Ireland  Yesterday  and  Today,  149. 

Irish  Land  Purchase  Acts,  146. 

Interstate  Commerce  Commission,  247. 

Judicial  Construction,  enlargement  of  government  powers 

by,  241. 
Judicial  Discretion,  an  uncertain  form  of  tenure,  255. 

King  John,  granting  of  Magna  Charta  by,  223. 
King  William  III,  251. 

Labor  Not  a  Commodity,  94;  copartnership,  67,  €8,  102,  197. 
Laboring  Classes,  destiny  of,  86;  struggles  of,  36. 


INDEX  299 

Land  Capitalism  and  Industrial  Capitalism,  150. 

Land  Grants,  152. 

Land  Purchase  Acts,  Ireland  before  and  after  the  passage 
of,  148. 

Leclaire,  Edme  Jean,  70,  188. 

Lippman,  Walter,  192. 

Living,  American  Standard  of,  24. 

London,  Jack,  200,  201. 

Madison  (James),  on  the  commerce  clause  of  the  constitu- 

t  tion,  240. 

Magna  Charta,  granting  of,  by  King  John,  223;  the  con- 
stitution as  our,  222,  224. 

Manager,  General,  appointment  of,  179. 

Managerial  Ability,  ownership  not  necessary  to,  121. 

Manly,  Basil  M.,  33. 

Marshall,  Chief  Justice,  on  the  taxing  power,  226;  opiniom 
of,  in  the  Dartmouth  College  case,  252. 

Master  and  Servant,  relation  of,  12. 

Mill,  John  Stuart,  71,  109,  189. 

Mitchell,  John,  23. 

Montesquieu,  on  the  nature  of  taxation,  227. 

Munn  v.  Illinois,  264,  265,  266,  267. 

Nasmyth,  James,  187. 

Nearing,  Professor  Scott,  29. 

Operation,  joint,  distinguished  from  profit-sharing,  123. 

Operatives,  as  sole  owners,  182;  as  joint  owners  with  non- 
working  capitalists,  181;  double  incentive  of  joint 
owners  to  become  sole  owners,  182. 

Operatives'  Associations,  corporate  powers  of,  175. 

Operative  Ownership,  91;  meaning  of  the  term,  91;  benefits 
of,  in  general,  186;  to  the  capitalist,  186,  194;  to  the 
operatives,  194,  200;  to  the  state,  210;  to  society, 
213;  advantages  of,  summarized,  279;  proposed 
scheme  for  establishment  of,  129;  introducing  the 
system,  175;  obstacles  to  its  adoption,  110;  conserva- 
tive tendency  of,  218. 

Organized  Labor,  23. 

Ownership,  Public,  part  of  Socialistic  program,  51. 

Parliament,  British,  passage  of  Irish  Land  Purchase  Act 
by,  146. 

Participation,  by  labor  in  management  and  profits  of  in- 
dustry exemplified,  103. 

Paternalism,  282. 

Police  Power,  The,  defined,  248,  249;  declared  to  be  an 
attribute  of  sovereignty,  248 ;  a  creature  of  the  courts, 
250;  unknown  to  the  constitution,  250;  scope  of, 
constantly  expanding  through  court  decisions,  258; 
permits  taking  of  property  without  compensation, 
250;  how  it  operates,  261;  conflicting  decisions  in 
relation  to,  254;  menace  of,  249. 


300  INDEX 

Poverty,  30. 

Pre-Capitalist  Industries,  104. 

Principles  of  Political  Economy,  The,  189. 

Principles  of  Sociology,  196. 

Progressive  Taxation,  234;  as  an  instrument  of  confisca- 
tion, 235. 

Profit-Sharing,  67,  68;  as  an  incentive  to  efficiency,  197, 
198;  as  a  form  of  anti-strike  insurance,  68,  124;  as 
a  weapon  against  organized  labor,  124. 

Property,  meaning  of  the  term,  220;  the  rights  of,  221; 
sacred  in  scheme  of  Operative  Ownership,  129. 

Propertyless  Classes,  influence  of,  in  increasing  taxes,  284; 
beneficiaries  of  public  extravagance,  284. 

Public  Opinion,  the  courts  influenced  by,  258;  an  unsafe 
criterion  of  human  rights,  260. 

Public  Utilities,  socialization  of,  63. 

Railway  Construction,  rapid  development  of,  19. 

Railway  regulation,  disastrous  results  of,  191. 

Railway  securities,  depreciation  of,  through  excessive  regu- 
lation, 269. 

Railway  Statistics  of  the  United  States,  191. 

Regulation  of  Industry,  growing  sentiment  for  further,  275* 

Riis,  Jacob,  30. 

Roosevelt,  Theodore,  109;  would  use  government  aid  to 
enable  tool-users  to  become  tool-owners,  111. 

Ryan,  Doctor  John  A.,  25,  110. 

Scientific  Management,  202,  203;  opposition  of  organized 
labor  to,  203;  objections  to,  cannot  be  urged  under 
Operative  Ownership,  204. 

Sherman  Anti-Trust  Act,  242;  serious  fault  of,  244. 

Skemp,  J.  C.,  on  profit-sharing,  125. 

Slavery,  human,  in  England,  15;  in  the  United  States,  130. 

Small,  Professor  Albion  W.,  26. 

Smith,  Adam,  94,  228. 

Socialism,  46,  47,  48;  present  aim  of,  52;  growth  of,  61; 
not  declining,  62;  a  real  menace,  64;  elimination  of, 
279. 

Socialism  and  Individualism,  49. 

Socialistic  Theory  of  Society,  49. 

Socialist  Platform,  53. 

Spargo,  John,  on  confiscation  by  taxation,  236. 

Spencer,  Herbert,  13. 

State,  the,  paramount  in  human  relations,  49. 

Steam  Engine,  13. 

Strikes,  cost  of,  39. 

Sullivan,  J.  W.,  on  profit-sharing  and  labor  copartnership, 
127. 

Sutherland,  Hugh,  on  results  of  Irish  Land  Purchase  Acts, 
148,  149. 


INDEX  301 

Taft,  President,  on  disastrous  effects  of  over-regulation,  272. 

Tariff,  Protective,  151. 

Taxation,  226;  progressive,  234. 

Taxes,  226,  227;  great  increase  in,  282;  burden  of,  equalize* 
and  distributed  under  Operative  Ownership,  285. 

Taylor,  Frederick  Winslow,  203. 

Taylor,  Sedley,  198,  199,  202. 

The  Battles  of  Labor,  39. 

The  Collectivist  State  in  the  Making,  59. 

The  Manufacturing  People  of  England,  17. 

The  Principles  of  Political  Economy,  71. 

The  Principles  of  Scientific  Management,  204. 

The  Social  Unrest,  54. 

The  Theory  of  Social  Revolutions,  253. 

The  War  of  the  Classes,  52,  200. 

The  Wealth  of  Nations,  228. 

Thompson,  Slason,  191. 

Tools,  necessity  of,  to  labor,  100;  ownership  of,  by  tool- 
users,  133. 

Trade  Agreements,  82;  in  England,  84;  the  goal  of  trade- 
unionism,  85. 

Trade  Unionism,  46,  47,  80;  achievements  of,  80;  the  true 
goal  of,  85,  90. 

Traditions,  venerable,  violated  by  the  Sherman  Act,  245. 

Trinity  Church  Case,  253. 

Unemployment,  21;  the  problem  solved,  208;  evil  of,  elim- 
inated under  Operative  Ownership,  206. 

Unemployment  Question,  the,  absence  of,  among  farmers, 
207. 

Union  Pacific  Railway,  154. 

United  Mine-Workers,  55. 

Views  of  Society  Changing,  131. 

Voting  Power,  equality  of  rights  contingent  on,  291;  lack 
of,  the  real  crime  of  big  business,  291. 

Wages,  22-25. 

Wage-Capitalism,  11,  12,  16,  129,  131;  in  America,  17; 
exorbitant  toll  of,  42. 

Wages,  scantiness  of,  20. 

Walsh,  Frank  P.,  30,  32. 

Wealth,  Diffusion  of,  216;  secure  under  Operative  Owner- 
ship, 285. 

Weeks,  John  W.,  58. 

William  III,  King,  charter  from,  to  Trinity  Church,  251. 

Workers'  Ownership  of  Tools,  principle  of,  adapted  to  mod- 
ern conditions,  107. 

Wright,  Carroll  D.,  38. 


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